LOL......I guess the SEAHAWKS lost. I had season tickets for the first 7-8 years of the term. I saw Jim Zorn play his first game along with Steve Largent, and the rest of those early players. I finally gave up my tickets. It became a huge chore to go to the games, find parking, waste the entire day and watch the team get beat......and than have to go to work the next day. I did like Chuck Knox....he was a REAL football coach. Yeah.......GE......I did own that stock for a long time. It was a great DOMINANT dividend stock back in the day.....when they had their GE financing going full steam and were a money making machine. I got out of the stock a long time before the current troubles........I BAILED when IMMELT became CEO......I thought that was a VERY foolish move and did not want to have anything to do with a company that he was leading. A typical CELEBRITY CEO.........which I HATE.
Not a bad open today.....with all the averages being positive at the moment......especially the SP500 and the NASDAQ. We have POTENTIAL for a good close today. I am actually surprised that we are positive across all the averages with the Ten Year Yield up at 1.6% today......still near the bottom of the 100 year average......and the jobs report today.
HERE is the economic news......that no one will care about. September’s jobs creation comes up short with gain of just 194,000 https://www.cnbc.com/2021/10/08/september-jobs-report.html (BOLD is my opinion OR what I consider important content) "Key Points Nonfarm payrolls increased by 194,000 in September, compared with the Dow Jones estimate for 500,000. The unemployment rate dropped to 4.8%, better than the expected 5.1%. Leisure and hospitality along with professional and business services and retail led job creation. Markets initially reacted little to what was a mixed bag of a report held back by a sharp decline in government jobs. The U.S. economy created jobs at a much slower-than-expected pace in September, a pessimistic sign about the state of the economy though the total was held back substantially by a sharp drop in government employment. Nonfarm payrolls rose by just 194,000 in the month, compared with the Dow Jones estimate of 500,000, the Labor Department reported Friday. The unemployment rate fell to 4.8%, better than the expectation for 5.1% and the lowest since February 2020. The headline number was hurt by a 123,000 decline in government payrolls, while private payrolls increased by 317,000. The drop in the jobless rate came as the labor force participation rate edged lower, meaning more people who were sidelined during the coronavirus pandemic have returned to the workforce. A more encompassing number that also includes so-called discouraged workers and those holding part-time jobs for economic reasons declined to 8.5%, also a pandemic-era low. “This is quite a deflating report,” said Nick Bunker, economic research director at job placement site Indeed. “This year has been one of false dawns for the labor market. Demand for workers is strong and millions of people want to return to work, but employment growth has yet to find its footing.” Nevertheless, markets reacted little to the news, with Dow futures around flat for the morning and government bond yields mixed as investors digested what was a mixed bag of a report. Despite the weak jobs total, wages increased sharply. The monthly gain of 0.6% pushed the year-over-year rise to 4.6% as companies use wage increases to combat the persistent labor shortage. The available workforce declined by 183,000 in September and is 3.1 million shy of where it was in February 2020, just before the pandemic was declared. “Labor shortages are continuing to put severe upward pressure on wages ... at a time when the return of low-wage leisure and hospitality workers should be depressing the average,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. Leisure and hospitality again led job creation, adding 74,000 positions, as the unemployment rate for the sector plunged to 7.7% from 9.1%. Professional and business services contributed 60,000 while retail increased by 56,000. Job gains were spread across a variety of other sectors: Transportation and warehousing (47,000), information (32,000), social assistance (30,000), manufacturing (26,000), construction (22,000) and wholesale trade (17,000). The survey week of Sept. 12 came just as Covid cases were peaking in the U.S. The delta variant spread since has cooled, with cases most recently dropping below an average of 100,000 a day. Unemployment for Blacks fell to 7.9% from 8.8%, due largely to a drop to 66% from 66.7% in the labor force participation rate for males. There was some good news in Friday’s report from previous months. July’s already-strong gains were revised higher by 38,000 to 1.0913 million, while August’s big letdown also was revised up, to 366,000 from the initially reported 235,000. The employment-to-population level increased to 58.7%, its highest since March 2020. The report comes at a critical time for the economy, with recent data showing solid consumer spending despite rising prices, growth in the manufacturing and services sector, and surging housing costs. Federal Reserve officials are watching the jobs numbers closely. The central bank recently has indicated it’s ready to start pulling back on some of the extraordinary help it has provided during the pandemic crisis, primarily because inflation has met and exceeded the Fed’s 2% goal. However, officials have said they see the jobs market still well short of full employment, a prerequisite for interest rate hikes. Market pricing currently indicates the first rate increase likely will come in November 2022. “After looking like almost a done deal, today’s jobs number has thrown expectations for tapering into disarray. The Fed doesn’t seem to need much to convince it that tapering should begin imminently, but at just 194,000, jobs numbers are suggesting that the labor market is further from hitting the substantial progress goal than they expected,” said Seema Shah, chief strategist at Principal Global Investors. MY COMMENT DUH........it is easy to completely DISTORT and destroy the economy by shutting it down. It is very difficult to get it to re-open. We are going to see this sort of disruption, distortion, and re-opening issues for a long time. Add in the impact to countries around the world that we depend on for manufacturing and all the supply chain issues and......it is what it is. As to the unemployment rate......I simply dont believe it. I dont think there is any way it is that low. I see it as simply statistical games and distortions of the data. SMALL business is the FORGOTTEN topic in all of this. They are getting hammered as they did through this entire shutdown event.
I like this little article.......it shows how IGNORANT all the politicians and financial media are. Or.....is it INTENTIONAL? Not that I care......it is just GAMES......and I simply dont care. The US has never defaulted on its debt — except the four times it did https://thehill.com/opinion/finance...lted-on-its-debt-except-the-four-times-it-did (BOLD is my opinion OR what I consider important content) "Every time the U.S. government’s debt gets close to the debt ceiling, and people start worrying about a possible default, the Treasury Department, under either party, says the same thing: “The U.S. government has never defaulted on its debt!” Every time, this claim is false. Now Treasury Secretary Yellen has joined the unfailing chorus, writing that “The U.S. has always paid its bills on time” and “The U.S. has never defaulted. Not once,” and telling the Senate Banking Committee that if Congress does not raise the debt ceiling, “America would default for the first time in history.” This is all simply wrong. If the United States government did default now, it would be the fifth time, not the first. There have been four explicit defaults on its debt before. These were: The default on the U.S. government’s demand notes in early 1862, caused by the Treasury’s financial difficulties trying to pay for the Civil War. In response, the U. S. government took to printing pure paper money, or “greenbacks,” which during the war fell to significant discounts against gold, depending particularly on the military fortunes of the Union armies. The overt default by the U.S. government on its gold bonds in 1933. The United States had in clear and entirely unambiguous terms promised the bondholders to redeem these bonds in gold coin. Then it refused to do so, offering depreciated paper currency instead. The case went ultimately to the Supreme Court, which on a 5-4 vote, upheld the sovereign power of the government to default if it chose to. “As much as I deplore this refusal to fulfill the solemn promise of bonds of the United States,” wrote Justice Harlan Stone, a member of the majority, “the government, through exercise of its sovereign power…has rendered itself immune from liability,” demonstrating the classic risk of lending to a sovereign. In “American Default,” his highly interesting political history of this event, Sebastian Edwards concludes that it was an “excusable default,” but clearly a default. Then the U.S. government defaulted in 1968 by refusing to honor its explicit promise to redeem its silver certificate paper dollars for silver dollars. The silver certificates stated and still state on their face in language no one could misunderstand, “This certifies that there has been deposited in the Treasury of the United States of America one silver dollar, payable to the bearer on demand.” It would be hard to have a clearer promise than that. But when an embarrassingly large number of bearers of these certificates demanded the promised silver dollars, the U.S. government simply decided not to pay. For those who believed the certification which was and is printed on the face of the silver certificates: Tough luck. The fourth default was the 1971 breaking of the U.S. government’s commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement. Since that commitment was the lynchpin of the entire Bretton Woods system, reneging on it was the end of the system. President Nixon announced this act as temporary: “I have directed [Treasury] Secretary Connally to suspend temporarily the convertibility of the dollar into gold.” The suspension of course became permanent, allowing the unlimited printing of dollars by the Federal Reserve today. Connally notoriously told his upset international counterparts, “The dollar is our currency but it’s your problem.” To paraphrase Daniel Patrick Moynihan, you are entitled to your own opinion about the debt ceiling, but not to your own facts about the history of U.S. government defaults. MY COMMENT I saw an article today quoting YELLEN that we just should get rid of the debt ceiling. CRAZY STUFF.......and probably one of the primary agenda reasons this debt stuff is being pushed right now. NOT a good thing for the actual people that fund the government......those that actually pay TAXES. I dont think this will actually happen....but it is TELLING that someone in POWER is suggesting this in public. My question as an investor.......does history matter? If the VAST majority of the public, leaders, and media have ZERO knowledge of history.......it than becomes IRRELEVANT. Just more modern TRIVIA.
MINIMAL loss today....but I was in the RED. Plus a small beat by the SP500 of 0.05%. All in all not too bad with the nice gain yesterday. Step by step.....day by day.....sooner or later it adds up to REAL MONEY.
ACTUALLY......a really good week this week for all the averages that count......DOW, SP500, NASDAQ 100, and NASDAQ. And......considering the entire week.....an EXCEPTIONAL gain for the average that means the most to me.....the SP500. DOW year to date +13.53% DOW for the week +1.22% SP500 year to date +16.91% SP500 for the week +0.79% NASDAQ 100 year to date +14.99% NASDAQ 100 for the week +0.20% NASDAQ year to date +13.12% NASDAQ for the week +0.09% RUSSELL year to date +13.08% RUSSELL for the week (-0.38%) The SP500 is nicely setting the pace for all the averages so far this year. The gain this week was EXCEPTIONAL....especially considering the news this week and everything that was going on. I will take a gain of +0.79% for a week.....any time I can get it. That would translate into a gain of 41% for a year. We NOW move forward to the FINAL 12 weeks of the year. We need to get this year LOCKED IN and move on to a new year and a new start for investors.
HERE is a positive take on the Treasury Market situation. I like it. Who Keeps Snapping Up US Debt? Demand for US Treasury Bonds is broad-based. https://www.fisherinvestments.com/en-us/marketminder/who-keeps-snapping-up-us-debt (BOLD is my opinion OR what I consider important content) "Among the many talking points surrounding the ongoing debt ceiling debate is a simple question: If the US keeps adding debt, won’t we run out of buyers? Where is all the demand going to come from? While no one can know what the future holds precisely, recent history can be instructive—and perhaps put one of investors’ debt fears to bed for the time being. The recent history we refer to is the approximately $5.1 trillion added to net public debt since the end of 2019—all the bonds issued to fund COVID relief and other spending. This is the largest, fastest increase outside of wartime, and during the middle of a global economic crisis to boot. Yet that didn’t deter Treasury demand. Buyers abounded, and that robust demand is a big reason why 10-year US Treasury yields are lower today than they were at 2019’s end. Exhibit 1 details this demand, showing the increase in major owners’ holdings of US debt between December 2019 and July 2021—the latest month for which the Treasury has published information on international owners. As it shows, demand was broad-based. Exhibit 1: Major Investors’ Increase in US Treasury Holdings (USD Billions), 12/31/2019 – 7/31/2021 Source: Federal Reserve and US Treasury, as of 10/6/2021. “Other International” refers to the net change in all other countries’ holdings. Interestingly, China, the US’s second-largest international creditor after Japan, is absent from this chart. There is a simple reason for this: China’s US Treasury holdings fell by $1.6 billion over this stretch, shattering the long-running myth that China is propping up America’s debt.[ii] Demand is much, much broader. The Fed’s huge role in Treasury markets over this period has raised plenty of eyebrows. Some argue the Fed is effectively financing Treasury debt, putting modern monetary theory in action. Others worry that as the Fed “tapers” and eventually ends its quantitative easing (QE) bond purchases, the Treasury’s chickens will finally come home to roost—without the biggest buyer over the past 21 months, surely now demand will crater. But we also have a historical counterpoint for this theory, courtesy of the five-plus year stretch between the end of the Fed’s post-financial-crisis QE and the end of 2019. Net public debt rose $4.3 trillion during that stretch, while the Fed’s holdings decreased. China slashed its holdings by $174.4 billion during this period.[iii] But there were oodles of international and domestic investors to fill the shortfall, as Exhibit 2 shows. That is a big reason why the average interest rate on marketable US debt rose incrementally over these five-plus years, from 2.016% in October 2014 to just 2.360% in December 2019.[iv] (For those curious, it was all the way down to 1.470% in September 2021, the latest figure available.[v]) Does that seem too low to attract investors? Just look globally. Rates are negative across much of Europe and Japan. Exhibit 2: Major Investors’ Increase in US Treasury Holdings (USD Billions), 10/31/2014 – 12/31/2019 Source: US Treasury, as of 10/6/2021. “Other International” refers to the net change in all other countries’ holdings. If this history is a guide, it seems fair to say the demand for US Treasurys is highly likely to come from American and international investors. Maybe some international central banks and sovereign wealth funds. Probably some international banks, pension funds, insurers, fund managers and other institutional investors. Quite likely some American banks, pension funds, insurers, mutual funds, index funds and retail investors. People and institutions who want or need to own stable assets with high liquidity and low volatility have a strong tendency to flock to the world’s deepest, most liquid government asset—an IOU from Uncle Sam. Judging from late-September’s Treasury auctions, which were oversubscribed, debt ceiling bickering and Fed taper talk haven’t dented that demand in any meaningful way. We doubt that changes in the foreseeable future. MY COMMENT With negative interest rates the norm in much of the world....there should be no problem UNLOADING American Treasuries......the SAFEST debt instrument in the entire WORLD. I was surprised at the extent of the FED holdings shown in Exhibit 1 above....it is pretty dramatic when you see it in chart form. It is pretty DRAMATIC to see that the FED is NOW holding WELL OVER half of all Treasuries. Although the FED is NOT a government agency....it may as well be. So we have the government holding over half of all government debt.....not a pretty sight.
TGIF.....as usual. Lately it is GLORIOUS to get to Friday and the end of another week. Investors in general are adding gains.....but the process of getting there is CRAZY. This week was no exception......even though I KNOW it was a nice positive week.......it still seems like a negative week to me on a psychological level. Luckily......how I invest.....staying fully invested all the time......saves me from my psychological brain and the temptation that humans have to......DO SOMETHING.
HERE is the perfect example......yes, once again...why I do NOT invest in Chinese companies........actually.....make that CAYMAN ISLAND SHELL COMPANIES. Evergrande Creditors Brace for Battle on Offshore Assets https://finance.yahoo.com/news/evergrande-creditors-brace-battle-fate-150509199.html (BOLD is my opinion OR what I consider important content) "(Bloomberg) -- Kirkland & Ellis and Moelis & Co. are working on contingency plans with offshore holders of China Evergrande Group’s bonds who fear the struggling company may sell assets that they’re counting on to back up their claims if the business collapses. The law firm and the New York-based investment bank are advising a group that so far includes six members holding $2.5 billion of Evergrande offshore bonds, a Moelis managing director said on a call with bondholders Friday. They’ve been trying to engage with Evergrande and its advisers since Sept. 16, sending letters asking for information about the company’s situation and assurances that management won’t sell offshore assets while a solution is being discussed. So far, there hasn’t been any meaningful response, a Kirkland partner said during the call, which reporters were invited to monitor. The offshore holders could be vulnerable because by some estimates, they rank among the lowest priority for repayment if Evergrande becomes insolvent. Cayman Law Kirkland is one of the biggest U.S. law firms specializing in distressed companies and bankruptcies. A Kirkland lawyer said the bondholder group is working with Harneys, the global offshore law firm. A person familiar with the situation said holders are looking at various forms of recourse, including laws of the Cayman Islands where Evergrande’s listed parent is incorporated. Representatives for Evergrande didn’t immediately respond to an emailed request for comment after regular business hours. The bondholder group is seeking more clarity as Evergrande embarks on a wave of asset sales. The developer’s property-management arm is said to have piqued the interest of Hopson Development Holdings for a deal that would value the business at around HK$40 billion ($5.1 billion). Last month, Evergrande agreed to offload a 20% stake in Shengjing Bank Co. for $1.5 billion, with the bank demanding that all proceeds go to settle debts due to the lender. That transaction could give preferential treatment to the bank over Evergrande’s stakeholders, a Moelis managing director said on the call. Evergrande’s situation is complex not just because of the humongous debt pile, but also because the restructuring will affect jurisdictions including China, Hong Kong, the Cayman Islands and New York. The bondholders are acting amid signs that China will do everything it can to ring-fence Evergrande rather than organizing a bailout of the teetering developer, whose distress has roiled global markets for weeks. This doesn’t bode well for bondholders -- both onshore and abroad -- looking for some kind of government rescue. Their concerns have been fanned by reports that Evergrande has already failed to pay some of its debts. The Chinese real estate developer skipped interest due Sept. 23 and Sept. 29 on some dollar-denominated notes and entered a grace period, which gives the company a short time to make good on the debt before it becomes a formal default. Earlier this week, Bloomberg News reported that creditors didn’t get repayment of a $260 million bond issued by Jumbo Fortune Enterprises. The note is guaranteed by China Evergrande Group and one of its units, creditors said, and it could be the firm’s first major miss on maturing notes since regulators urged the developer to avoid a near-term default. Evergrande’s offshore bondholders could wind up last in line when it comes to getting paid in a restructuring. Distressed-debt veteran Michel Lowy said in a Bloomberg Television interview Friday that unfinished properties, unpaid contractors, homebuyers and the onshore creditors will all be prioritized ahead of overseas investors, and it may take many months for the developer to share its restructuring proposal given the complexity of the company." MY COMMENT THERE is no doubt that offshore investors will be left holding the bag in this case. the CHINESE DICTATORSHIP......the real owner of EVERY business in China.....is NOT going to do or approve anything that is to their disadvantage. Of course....the Chinese government also CONTROLS the Chinese court system and every judge in the country......at least those that dont want to DISAPPEAR. It does not take much thought to know who is going to get SCREWED in this situation.
so I’m essence we owe ourselves money… a shit ton of money at that… Of course this sounds STUPID when you really think that that’s what it means… but what it really means is that you can bet there there will be someone who will pay us… er.. that will be US… As in WE THE PEOPLE
HERE is kind of a weekend article......on the shipping crisis.....interesting, This crazy shipping crisis, explained https://finance.yahoo.com/news/this-crazy-shipping-crisis-explained-094340766.html (BOLD is my opinion OR what I consider important content) "As we head closer to the second anniversary (if that’s the right word for it) of the pandemic, it’s clear we’ve made some great progress fighting COVID-19. We have testing and vaccines that work. We know masks and social distancing are effective. Despite the nagging disruptions that mark much of what we do — and even worse the horror of continued sickness and death — in some ways, we can hope that the worst is behind us. But not all of it. An under-recognized characteristic of any pandemic is its nonlinear course, which delivers, in true viral fashion, shocking, unanticipated consequences. That brings us — 20 or so months into the COVID-19 pandemic — to a vast oceanic parking lot dotted with scores of giant container ships off the ports of Long Beach and Los Angeles. No doubt you’ve heard how the world’s supply chain is being stressed like never before, resulting in shortages and delays in everything from semiconductors, to cars, sneakers, exercise equipment, and Rolexes. Initially this was because factories in Asia (for example) had to close for weeks or even months because workers were sick with the coronavirus. That was true and still is the case in Vietnam, for instance. Now the pain point has shifted to ships. What we are witnessing is a massive, unprecedented traffic jam of humankind's largest sea vessels that is at the very core of the conundrum. “I don't think anyone's ever seen anything like this in their careers, anyone who's alive,” says a board member of a large shipping company whose family has been in the business for decades. "Containergeddon,” is what Steve Ferreira of shipping consultancy Ocean Audit calls it, according to Reuters. How bad is this? How did it happen? What does this mean going forward? How will this impact the U.S. economy? And how and when does it get resolved? Let’s start at the very beginning, (as Maria von Trapp might say). First understand that 90% of the world's global trade is shipped by sea, with 70% in containers. Over the past two decades, a number of trends have shaped the business. First, when it comes to the United States, we have been increasing our outsourcing and reliance on imported goods. Example: In January 1985 (as far back as data went), we imported $293 million of goods from China (and had a positive trade balance). Flash forward to today, in August of this year, our imports from China totaled nearly $43 billion. That’s up 146-fold in 36 years. Our imports from Asia across the board are up. China is the No. 1 exporting nation to the U.S., but Japan, South Korea, and Vietnam are also on the top 10 list. Second, companies and consumers increasingly count on just-in-time inventory systems to order goods. That makes for lower inventories, which reduces costs for U.S. companies and allows consumers unprecedented immediate gratification from a global cornucopia of goods. Example: If Pottery Barn needs 50 couches from China, the company orders it, and two weeks later or three weeks later, the couches are on the West Coast of the United States. Third, the shipping business over the past decade has not been very profitable — ”a fricking nightmare” my source called it — until now (see below), which meant there was little investment in new ships. Meanwhile in the U.S., railroads have been cutting costs and reducing headcount. This on that last point from an AP story: “More than 22% of the jobs at railroads Union Pacific, CSX and Norfolk Southern have been eliminated since 2017, when CSX implemented a cost-cutting system called Precision Scheduled Railroading that most other U.S. railroads later copied. BNSF, [owned by Berkshire Hathaway] the largest U.S. railroad and the only one that hasn’t expressly adopted that model, has still made staff cuts to improve efficiency and remain competitive.” What all this means is that the global supply chain, particularly the part of it that connects Asia to the U.S., has been running at full capacity with no margin for error. “When you have a problem anywhere in the supply chain, it’s going to have a ripple down effect, like playing dominoes,” says Cathy Roberson,founder and president of supply chain consulting group Logistics Trends and Insights LLC, and former market analyst at UPS Supply Chain Solutions. “If freight is late arriving at port, that means the time scheduled for the truck to be at port is wrong; now you have to go back and reschedule. That will cause additional delays and costs; now you have to put the items in a temporary warehouse if you can find space. Incurring additional costs for that. From there, once you finally get a truck, moving it inland you have to constantly reschedule delivery times. Having to jungle all that, monitor that, takes time and takes people and costs extra money.” “We’re living on our grandparents’ investments here,” says John Porcari, the port envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force, who was appointed in August to address port congestion. “As global commerce increased, as the e-commerce economy increased, we haven’t made infrastructure investments keep up. Seams in the structure were showing pre-COVID. The pandemic laid bare the underlying reality.” Porcari also points out that the domestic supply chain (ports, rail, and trucks) is almost entirely in the hands of private sector players that do very little data sharing. So you take all that and then, enter COVID. When the pandemic first hit full-bore last spring, and much of the world went into lockdown, global trade slowed as factories in China and elsewhere closed. The volume of goods to ship dropped. Meanwhile shell-shocked consumers, not knowing how long they’d be stuck at home, bought food and little else. So both supply and demand fell, ergo shipping volume and rates slumped. But not for long. By late spring 2020, it became apparent that work from home wasn’t just until Memorial Day weekend, it was until, well, who knows. That’s when Americans began to buy Pelotons (PTON), patio furniture, and hiking boots in earnest. As factories came back on line in Asia, trade began to boom and boom and boom. All that money that once went to movie theaters, MLB games, and tropical resorts began to go instead to buying stuff. Stuff made in China. Today, ports in the U.S., particularly on the West Coast and especially Long Beach-LA, where 36% of U.S. imports land, are unloading record amounts of cargo. And that’s where the traffic jam is the worst. It's an understatement to say that demand for cargo ships is extreme. More accurate is off the charts. Check out the Howe Robinson Containership Charter Index, which essentially shows the cost of chartering a giant container ship. Yes, it's up 10X over the past year. The previous record was set back in June 2005, when it hit 2,093 points. (NB: You can see the little dip I was talking about when the pandemic first hit.) Graph depicts the Howe Robinson Containership Index over time up to Oct. 6. Courtesy of Howe Robinson. What does that mean in practical terms? Well, shipping companies are mining money, for one. And companies like Walmart (WMT), Costco (COST), Home Depot (HD), and others have responded by chartering their own ships. For how much? Below are two examples. I can’t be more specific because the companies are loathe to have these crazy numbers put out there. Item: One of America’s largest big box retailers, just chartered a cargo ship for $80,000 a day for one year. A year ago, that would have been $10,000 or $15,000 a day. Item: One of Japan's "Sogo shosha," or giant holding companies, is looking to charter a ship for $130,000 a day for three years, which would have been $20,000 a year ago. The company will have to put up $35 million for the first nine months in cash, on day one. Wow! Who’s going to pay for all that? We are of course, via higher priced goods. If that doesn’t scream inflation to you, you must be high. And I’m talking about non-transitory inflation here, as in real inflation that sticks around for years. Another issue here is that while those big companies can afford to charter their own ships to get their goods, smaller companies can't, which confers a big advantage to the big players at the expense of the little guys. Consider the economic implications of that. The Washington Post ran an excellent piece recently that got into much of this. Here are just two of the many bullet points worth noting: “This month, the median cost of shipping a standard rectangular metal container from China to the West Coast of the United States hit a record $20,586, almost twice what it cost in July, which was twice what it cost in January, according to the Freightos index.” And: “The seven largest publicly traded ocean carriers — including companies such as Maersk, COSCO and Hapag-Lloyd — reported more than $23 billion in profits in the first half of this year, compared with just $1 billion in the same period last year.” Talk about flush times. The Post article goes on to describe a system in the U.S. where shippers, ports, truckers, and railroads don’t communicate with each other nearly enough or as much as in other countries. It’s also the case that truckers are overworked and overwhelmed. There are reportedly now 16 containers waiting for every available truck at the port of LA. Railroads are scrambling to hire (back) workers. So just how bad is that traffic jam off of southern California now? At last count there were 60 ships lined up off Long Beach-LA. (There were some delays there even pre-COVID. Check out these satellite pictures.) There are now too many to anchor — new ships are being told to just drift in deep water. A few weeks ago it was even worse. Last month Popular Science reported that “a record 88 ships were sitting on the horizon, forming a line of vessels stretching south over 40 miles, from the entrance of the Port of Los Angeles all the way down to Dana Point.” Container ships and oil tankers wait in the ocean outside the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021. REUTERS/Lucy Nicholson If 60 ships doesn’t sound like much, understand that these ships are monsters, carrying as much as 23,000 TEUs (or twenty-foot equivalent units) containers, or half that number of FEUs (forty-foot equivalent units), the latter being the more common intermodal size that you see trucks hauling. Each FEU container can hold up to 29 tons. Example: An average dishwasher weighs 77 pounds. So one container could hold roughly 700 dishwashers (yes, I l factored in packing materials.) In theory then, doing the math, a single ship could hold 8 million dishwashers, which is right around the total number shipped in the U.S. each year. Unfortunately, as in the case of bad storms for air travel or a car crash for a highway trip, the delays are spreading. Shippers have been bypassing choked West Coast ports and sending vessels east to Savannah and New York. Now there are 24 ships off of Savannah (which is unprecedented) and seven to nine (depending which day you count) off New York City. Volume coming in is overwhelming the facilities in both locales. “Everyone is so focused on Los Angeles/Long Beach that the other ports are getting passes,” Craig Grossgart, senior VP global ocean at Seko Logistics, tells GCaptain. “Savannah is a mess, New York/New Jersey ports are a mess...” The crisis has brought out bad behavior and unintended consequences. First, fear of shortages has caused businesses big and small, never mind consumers, to engage in precautionary orders, (hoarding) in anticipation of delays. This of course only exacerbates the problem, by stuffing more goods in the supply chain. Then there’s also additional air pollution created by the ships waiting in those traffic jams. And you have wing nuts posting false information on social media, like this gem: “There are now 56 cargo freighters anchored off the coast of California from Oakland to Long Beach in what can only be considered a manufactured supply-chain halt.” False. This is not a “manufactured” halt. Facebook reportedly flagged this and other posts like it. The Washington Post reports that shippers “often decline to send containers inland to collect American farm exports, preferring to rush them back to Asia to capitalize on high eastbound freight rates. That’s why the LA port exports three times as many empty containers as full ones.” Guess what that’s doing to our trade balance. 'This is a wake-up call' What’s being done about all this? Here’s John Porcari, Biden’s port envoy: “We’re focused first on the short term, next 90 days, and second on longer term structural changes that need to be made. Doing both simultaneously is important. In the short term, we have to work with the system we have and the existing private operators have to increase the tempo on what they have. Over the longer term, as we build a better system — truly a system, not a bunch of individual elements that are flying in loose formation — there’s certainly a role of public investment to augment private investment." And so yes, LA and Long Beach are expanding their working hours, which is great. But remember the truckers and railroads are working flat out. There are also plans “for more data sharing and squeezing more productivity out of the system,” according to Freight Waves. Fair enough. I agree with Christopher Tang, a professor at UCLA’s Anderson School of Management, focusing on the global supply chain, who has consulted for companies such as Amazon and IBM. He says: “This is a wake-up call.I think globalization was under the assumption that global trade is frictionless. When you click, you get the product. American consumers in the pandemic have come to understand over-dependence on foreign supplies. “It’s time for the U.S. to rethink how to coordinate the supply chain. For some products, it’s time for us to produce them in the U.S.; for others, we can diversify the supply chain.” Or maybe Americans just need to buy less stuff. (Ha!) I don’t want to be alarmist, but it’s hard to see this completely clearing up anytime soon. Experts say that the snarls could be with us through 2022. Just one, for instance: “Operating ships is far more difficult now,” says my shipping source. “With COVID [protocols] you've got 200 countries with 200 different rules.” And now, enter the holiday shopping season. You may recall, back during an August visit to Singapore, U.S. Vice President Kamala Harris warned about supply chain disruptions, saying: “If you want to have Christmas toys for your children, now might be the time to start buying them, because the delay may be many, many months...” On the other hand, this holiday season you might want to consider giving your loved ones boxes of holiday cookies. Locally baked or homemade, of course." MY COMMENT What a mess. BUT there is NOTHING that can be done....other than just work through the backlog and try to get it taken care of. There is NO magic answer. You shut down the economy.....and you just have to SUFFER through the consequences. YES.......the re-opening is just at the begining........and.....we have a long way to go to get back to any sort of NORMAL economy. It is actually AMAZING that we are doing as well as we are.......a testament to BUSINESS.
YES.......the stock markets are open on Monday.....Columbus day. Although the bond markets will be closed.
I have seen this sort of article ALL YEAR.....usually just before earnings. We may have reached peak earnings https://www.cnn.com/2021/10/10/investing/stocks-week-ahead/index.html (BOLD is my opinion OR what I consider important content) "New York (CNN Business)Corporate profits soared in the first half of this year, largely because of favorable comparisons to last year's weak earnings. The Covid shutdown of the economy hit major companies hard in the first half of 2020. But as companies get set to report their third-quarter results in the next few weeks, some Wall Street analysts are concerned the rate of earnings increases will start to slow. This may be the peak for the foreseeable future. That could pose problems for investors. After all, stocks have surged this year — largely because Wall Street expected the profit party would keep going. Pepsi (PEP) kicked off earnings season on Tuesday with stronger than expected results. And the giants of Wall Street will dominate the earnings calendar this week. JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS) and several other top banks are all due to release figures for the third quarter. Delta (DAL), Domino's (DPZ) and Walgreens (WBA) are also on tap this week. Those results should be solid. According to estimates tracked by FactSet Research Systems, profits for companies in the S&P 500 are expected to rise 27.6% from the third quarter of 2020. The concern, however, is about diminishing growth rates going forward. FactSet senior earnings analyst John Butters said in a report that earnings are expected to increase by a still-healthy 21.5% in the fourth quarter, but he added that annual growth will be just 5.3% for the first quarter of 2022 and 9.6% for all of next year. A profit slowdown could be problematic because investors have gotten accustomed to blockbuster earnings for the past few quarters. As a result, stocks, despite a recent pullback, are trading at above average valuations. The S&P 500 is currently valued at more than 20 times earnings estimates for the next few months, according to FactSet. That's above the 5-year average of around 18 times profit forecasts — and the 10-year average of about 16 times earnings projections. In other words, earnings expectations may be unjustifiably high and the results may fail to live up to the considerable hype. "For many investors, higher rates are simply part of the broader reflationary narrative coming off a growth scare and S&P 500 earnings power will be more than sufficient to support another leg up in the benchmark index. We are less convinced," Lisa Shalett, chief investment officer and head of the global investment office at Morgan Stanley Wealth Management, said in a recent report. Shalett described stock prices as "rich" and noted that companies will have to deal with both "rising costs" and "disruptive competition." Meanwhile, the recent spike in long-term bond yields due to inflation fears won't help earnings either. Borrowing costs are now more expensive for companies and consumers. Shalett said that the Federal Reserve's insistence that these price increases are temporary could turn out to be incorrect. "Commodity prices are rising rapidly ... and financial conditions are tightening. There's also the risk that the 'transitory inflation' narrative may be wrong," she said. However, some point out that stocks may have room to run because prices, while hardly dirt cheap, aren't exorbitant either. "Rising earnings are providing valuation support and the basis for US stocks to trend higher," said Terry Sandven, chief equity strategist at US Bank Wealth Management, in a report. Sandven pointed out the S&P 500 traded at an extreme of nearly 30 times forecasts during the dot-com bubble in 2000 and was valued at roughly 28 times estimates in the pre-pandemic era of 2019. With that in mind, he noted these "below-extreme valuations support our glass half-full outlook" for stocks." MY COMMENT YES....sooner or later we......MIGHT......emphasis on "might".....hit an earnings period when there are soft earnings. BUT...this little article is ALL FLUFF......no substance at all to support the headline. In FACT the one company....that has reported BEAT estimates.......I expect significant BEATS. BUT...nothing says the markets will care or react. MY MEMORY.....is that a lot of companies in the last earnings period did not give forward looking information.......and.....many others gave reduced expectations. In addition over the past quarter many companies lowered their future business projections. In my opinion many companies did this simply to LOWER expectations.....NOT....due to ACTUAL anticipated results. I believe many companies INTENTIONALLY set a low bar going forward and they will EASILY BEAT the earnings expectations. Especially the companies in the SP500.....the most DOMINANT companies in the WORLD. Will the earnings.....no matter how good.....satisfy the short term traders and markets.....probably not....they never do. They ALWAYS find something to NITPICK.......but....in general earnings are going to be just fine. LONG TERM INVESTORS will do very well over the next 12-24 months as we re-open. Of course....as usual.....there is the USUAL chance for factors outside business to impact the markets and stocks.
WEEKEND....local....real estate update. Here in central Texas the market is STILL strong but definately slower now that we are in Fall and the kids back in school. In my little area there are 19 homes for sale out of 4200 homes. Prices seem steady and firm....but no longer escalating like CRAZY. In my little area the lowest price is $625,000 and the highest is $2,500,000. Houses are definately taking a little longer to sell now. I would say in the $1MIL+ range about 3-4 weeks is the norm. I expect that from January 1 on we will be back in a very HOT market again.
EARNINGS, EARNINGS, EARNINGS........the mothers-milk of long term investing. Big banks kick off Q3 earnings season, CPI inflation data: What to know this week https://finance.yahoo.com/news/big-...on-data-what-to-know-this-week-170456712.html (BOLD is my opinion OR what I consider important content) "Third-quarter earnings season ramps up in earnest this week with a packed schedule of major financial companies poised to report results. Key economic data will include the U.S. consumer price index for September, in the latest print on the state of inflation in the U.S. economy. Investors have been anxiously awaiting the start of the latest earnings season and bracing for a deceleration in corporate profit growth after a strong second quarter. S&P 500 earnings are expected to grow by 27.6% in aggregate for the third quarter, slowing sharply from the second quarter's nearly 90% growth rate, according to data from FactSet. Still, last quarter's results had been aided by easy comparisons to the pandemic-depressed profit levels of mid-2020. And at nearly 30%, the expected earnings growth rate for the third quarter would still be the third-fastest pace for the index since 2010. Traders are especially looking to see that supply-side challenges and rising input and labor costs weighed heavily on corporate profits for the latest quarter. Nearly two dozen S&P 500 companies — including major names like FedEx (FDX) and Nike (NKE) — have already reported third-quarter results, giving hints about the magnitude of the margin pressure being exerted by supply-side challenges. "Supply chain disruptions and costs have been cited by the highest number companies in the index to date as a factor that either had a negative impact on earnings or revenues in Q3, or is expected to have a negative impact on earnings or revenues in future quarters," FactSet's John Butters wrote in a note on Friday. Of the 21 S&P 500 component companies that have reported results so far, 15 of them have discussed negative impacts from these factors, Butters added. "After supply chain disruptions, labor shortages and costs (14), COVID costs and impacts (11), and transportation and freight costs (11) have been discussed by the highest number of S&P 500 companies," he added. For many companies, the specter of eventual interest rate hikes from the Federal Reserve and the present inflationary environment has presented a slew of concerns over higher input and borrowing costs. But for the Big Banks, a higher interest-rate environment generally translates into stronger profits in their key lending businesses, allowing them to command higher rates on loans. The major U.S. banks including JPMorgan Chase (JPM), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) are each set to report quarterly results this week. Heading into these results, many analysts have said they expect to see net interest margins expand alongside the creep higher in benchmark interest rates this year. And as the economic recovery chugs along, banks may further release loan loss reserves they set aside to protect against potential defaults and nonpayments over the course of the pandemic. "We expect 3Q21 EPS [earnings per share] results to be stronger on a year-over-year basis as loan loss reserves continue to be released albeit at a lower level than 1Q/2Q21 and the group posts positive revenue growth," RBC Capital Markets analyst Gerard Cassidy wrote in a note last week. "Key themes that we expect to see in the results include: (1) more signs of net interest margin (NIM) stabilization; (2) growth in the consumer loan, residential mortgage and commercial real estate mortgage portfolios; and (3) positive outlook guidance on credit, loan growth (especially commercial & industrial loans,) and NIM," he added. "Lastly, commentary on core operating expenses should be listened to carefully to see if the banks are starting to feel non-incentive compensation wage pressure." According to Matt O'Connor, Deutsche Bank managing director of U.S. banks equity research, banks still have considerable room for loan growth with the economic recovery under way. Total industry loans are still 1% below pre-pandemic levels from the fourth quarter of 2019, he said, and are down by an even more significant mid-single-digits percentage when excluding loans made via the COVID-era Paycheck Protection Program. “We remain positive on bank stocks given a likely multi-year positive backdrop for credit, interest rates and loan growth,” O'Connor wrote in a note. “It’s hard to be too negative on the banks given a generally favorable macroeconomic outlook among most (despite some slower activity more recently) and the prospect for higher rates and faster loan growth, though was we’ve noted before the timing/magnitude of this remains unclear.” For the year-to-date, the financials sector remains the second-best performer in the S&P 500 after the energy sector, climbing more than 30% so far in 2021. Consumer price index One of the most closely watched economic reports this week will be the Bureau of Labor Statistics' Consumer Price Index, due for release on Wednesday. The report is expected to show consumer prices rose at roughly the same month-on-month and annual rate in September as in August, reinforcing the persistent inflationary pressures present even as the economic recovery rolls on. Consensus economists are looking for the consumer price index to jump by 0.3% in September over the previous month and by 5.3% over the prior year. At least some of that increase will likely come as a result of jumping energy prices, with crude oil and natural gas prices spiking amid elevated demand and tight supply over the past month. However, even excluding more volatile food and energy prices, the CPI likely still rose at a 4.0% annual pace. The so-called core measure of CPI has moderated from June's 4.5% annual clip, or the fastest rate since 1991, but has still held markedly higher compared to pre-pandemic standards. Some of the categories mostly closely associated with the economic reopening have seen prices pull back after initial surges in the spring and early summer — but not by enough to bring down the overall level of CPI. “The key takeaway from the upcoming consumer price index will be how broadly across categories we are seeing price increases," Greg McBride, chief financial analyst for Bankrate, said in an email on Friday. "While used car prices, airfares, and lodging have all pulled back a bit, underscoring the idea that higher inflation might indeed be transitory, increases in others like shelter costs might just be heating up.” Other areas of the economy have also begun to show persistently heightened levels of inflation, with U.S. crude oil futures skyrocketing to their highest level since 2014 last week and commodity prices across the board moving higher. And last week's September jobs report also reflected a number of inflationary pressures in the labor market, with average hourly wages accelerating to the fastest year-over-year pace since February, and rise in the workweek taking place alongside a drop in labor force participation. "We expect reopening effects to continue to fade, but the risk from supply constraints is likely to be longer-lasting than previously expected," High Frequency Economics' Rubeela Farooqi wrote in a note. "That should provide ongoing support to goods prices, even as services inflation continues to revert to more typical trends on a normalization of activity." Economic calendar Monday: No notable reports scheduled for release Tuesday: NFIB Small Business Optimism, September (99.5 expected, 100.1 during prior month); JOLTS Job Openings, August (10.938 million expected, 10.934 million during prior month) Wednesday: MBA Mortgage Applications, week ended Oct. 8 (-6.9% during prior week); Consumer price index, month-over-month, September (0.3% expected, 0.3% during prior month); CPI excluding food and energy, month-over-month, September (0.2% expected, 0.1% during prior month); CPI year-over-year, September (5.3% expected, 5.3% during prior month); CPI excluding food and energy, year-over-year, September (4.0% expected, 4.0% during prior month); Real Average Hourly earnings, year-over-year, September (-1.1% during prior month); Real Average Weekly earnings, year-over-year, September (-1.4% during prior month); FOMC meeting minutes Thursday: Initial jobless claims, week ended Oct. 9 (325,000 expected, 326,000 during prior week); Continuing claims, week ended Oct. 2 (2.696 million expected, 2.714 million during prior week); Producer price index, month-over-month, September (0.6% expected, 0.7% during prior month); PPI excluding food and energy, month-over-month, September (0.5% expected, 0.6% during prior month); PPI, year-over-year, September (8.7% expected, 8.3% during prior month); PPI excluding food and energy, year-over-year. September (7.1% expected, 6.7% during prior month) Friday: Empire Manufacturing, October (25.0 expected, 34.3 during prior month); Retail sales, month-over-month, September (-0.2% expected, 0.7% during prior month); Retail sales excluding autos and gas, month-over-month, September (0.6% expected, 1.8% during prior month); Import price index, month-over-month, September (0.6% expected, -0.3% during prior month); University of Michigan sentiment, October preliminary (73.5 expected, 72.8 during prior month) Earnings calendar Monday: No notable reports scheduled for release Tuesday: No notable reports scheduled for release Wednesday: JPMorgan Chase (JPM), BlackRock (BLK), First Republic Bank (FRC), Delta Air Lines (DAL) before market open Thursday: Bank of America (BAC), Domino's Pizza (DPZ), Walgreens Boots Alliance (WBA), The Progressive Corp. (PGR), UnitedHealth Group (UNH), US Bancorp (USB), Wells Fargo (WFC), Morgan Stanley (MS), Citigroup (C) before market open; Alcoa (AA) after market close Friday: PNC Financial Services (PNC), Truist Financial Corp. (TFC), Coinbase Global (COIN), The Charles Schwab Corp. (SCHW), Goldman Sachs (GS) before market open . MY COMMENT This week will be MOSTLY BIG and medium size banks, banks, and more banks. Not particularly a good indicator of what is to come. At least we are going to get earnings started and get them out of the way....as we continue toward year end. The Consumer Price Index is a BIG ONE for me. I want to see what my cost of living increase is going to be for my Social Security for 2022.
EARNINGS......are going to start this week. BUT....it will be a while before we see much....initially it will mostly be ZILLIONS of BANKS reporting. It will be nice to have something else to distract from the daily short term news and opinion that tries to dominate the daily markets.
After a month or two of earnings we will return to the DEFAULT DRAMA in early December. What a waste of time and emotion. This Week in Debt and Taxes A couple of widely watched political developments advanced this week. https://www.fisherinvestments.com/en-us/marketminder/this-week-in-debt-and-taxes (BOLD is my opinion OR what I consider important content) "On Thursday, two widely watched political measures took steps forward: In the US, Congress advanced a measure to raise the debt limit, while Ireland signed on to the US-backed global minimum corporate tax deal. Here we will bring you up to speed on these matters—and put them in broader perspective. Congress’s itty-bitty debt-ceiling can kick: Wednesday, Republican Senate Minority Leader Mitch McConnell cleared the way for Democrats to pass a standalone debt limit extension. As his statement noted, he would “allow Democrats to use normal procedures to pass an emergency debt limit extension at a fixed dollar amount to cover current spending levels into December.” In other words, he wouldn’t filibuster a bill to raise the debt ceiling a smidge, so Democrats could pass it with a simple majority. 11 GOP Senators joined him, enough to allow a vote to advance—although not without intraparty rancor. Democratic Senate Majority Leader Chuck Schumer took him up on the offer the next day. What now? Legislation is progressing to increase the debt limit by $480 billion to $28.9 trillion, passing the Senate in a 50 – 48 party-line vote today. A House vote is expected Tuesday. If it passes, it should let the government finance spending through early December. Then we will likely be facing another fight and having the same (predictable)[ii] conversations about it over Thanksgiving. If so, don’t fret! Remember: Default risk was always next to zero. Default doesn’t mean skipping spending. It means failing to pay interest or principal on Treasury bonds. The Treasury has the means (tax revenue) and the motive (a constitutional mandate) to service the debt. The likelihood of default was and remains miniscule. Congress can always kick the can—in myriad ways—like they seem poised to next week (and 112 times before), which they will probably do again. Maybe the next time they will wait until the last moment—like usual. 136 countries’ corporate tax compromise: In other news, the global minimum corporate tax we discussed in June and again in July took a step forward this week. The plan seeks to establish a 15% minimum tax rate on multinationals’ profits where they are earned, not where they are headquartered. The main problem with this scheme: Tax havens stood to undermine the initiative—including Ireland, where many multinationals have flocked, and fellow EU members Estonia and Hungary—by refusing to sign on and undercutting the global minimum rate. For months, these nations have expressed reservations about the deal, which would see Ireland raise its tax rate from 12.5% to 15.0%. But Ireland and Estonia dropped their opposition Thursday after countries already party to the deal made concessions. Hungary followed Friday. Ireland received assurances it can keep its 12.5% tax rate for firms with less than €750 million in annual sales and tax incentives for research and development. It also succeeded in revising the original text. Instead of it stipulating a minimum tax of “at least 15%,” it now omits “at least,” making future attempts to raise it likely very difficult. Hungary joined after negotiators agreed to a 10-year implementation period before the tax takes effect and the ability for companies to deduct some costs, including payroll. Some other developing nations are still outstanding—Kenya, Nigeria, Pakistan and Sri Lanka. But the 136 countries that have signed on account for the vast majority of global GDP. While Ireland, Estonia and Hungary coming into the fold is notable, there remains a long row to hoe. Countries must still pass legislation, which isn’t assured. For example, Congress probably needs bipartisan support to give foreign governments jurisdiction to tax American companies. This means changing a treaty, and that requires a two-thirds Senate supermajority for ratification—a high hurdle, in our view. Meanwhile, some developing countries appear disgruntled at the last-minute exemptions, which they suggest leaves the agreement toothless and riddled with loopholes. Signatories are supposed to enact legislation next year for the accord to take effect in 2023. But that may be optimistic given lingering opposition—especially considering matters like America’s midterm elections. For investors, even if everyone backs it, tax changes have no preset market impact—and we think the scope of this one is rather minor. It mostly just affects tax havens currently under the minimum. But as Estonian Prime Minister Kaja Kallas mentioned when she signed on, it “will not change anything for most Estonian business operators, and it will only concern subsidiaries of large multinational groups.”[iii] Irish economists, too, expect changes to have only a negligible impact, which history backs up. Ireland raised rates from 10% to 12.5% in 1997 to comply with EU rules. This did little to curb Ireland’s attractiveness to multinationals over subsequent decades. Ditto for the abolition of the so-called Double Irish tax arrangement, which allowed American multinationals to avoid taxes on their non-US profits. We doubt a 2.5 percentage point change in tax rates changes most big multinationals’ competitiveness much. Besides, the focus on the headline 15% rate seems overstated. The devil is in the details. It remains to be seen how nations interpret the tax incentives and exceptions granted to bring tax havens in line—effective tax rates may be far lower than the proposed global minimum. Above all, though, taxes are just one small factor for corporations. The economic cycle and business conditions are far larger drivers longer term. Also, the potential for slightly higher taxes, discussed for months now, is likely largely baked into market expectations already. We suspect the issue will fade into the long-term backdrop, popping up now and then as new developments—or setbacks—occur. But unless there is some big change, it is unlikely to have any material effect on markets. MY COMMENT Yes....there will NOT be a default. It is all political theater. However.....there will be psychological and emotional impact on investors when the media FEAR MONGERS the issue as usual. this stuff WILL disrupt the normal markets for weeks if not a month or more at the end of the year. Lets hope..........emphasis on "HOPE"......that SANITY takes hold at the start of the Christmas season. As to the GLOBAL INCOME TAX.......I agree it will probably have minimal impact. BUT.....the USA income tax had minimal to zero impact on 99% of the people in the country when it was first enacted. NOW.....it has a HUGE impact on everyone and everything. This tax will be the same way. We are opening a very DANGEROUS door to GLOBAL TAXATION of companies and people. This tax will grow and grow and grow. At some point there will be taxes imposed on PEOPLE not companies.....PEOPLE.......for this or that. this is a VERY DANGEROUS opening move that WILL sooner or later lead to a GLOBAL tax system on EVERYTHING and EVERYONE.
I like this little article and its discussion of the markets.....although....I may not agree with some of the content. Of course.......it is mostly short term oriented stuff. So, food for thought for investors......as they sit and do nothing. Flavor of the Weak: Notable End to Some Key Winning Streaks https://www.schwab.com/resource-cen...le-end-to-some-key-winning-streaks?cmp=em-QYC (BOLD is my opinion OR what I consider important content) "September was a sad month, but not just for the stock market. Before I get to the business at hand, I want to pay tribute to my friend Tobias Levkovich, who sadly passed away on Friday after succumbing to injuries sustained after he was hit by a car in early September. I first met Tobias, who was Citigroup’s long-time Chief Equity Strategist, nearly two decades ago. He took on the role at Citi at about the same time as I took on my current role as Schwab’s Chief Strategist. I’ve been a great admirer of his work since then; but also his humanity, humility and humor. Tobias made me, and many of us, better strategists and will be missed by us all. Rest in peace my friend. Onward and downward? September closed with a whimper (from folks hoping the seven-month stretch of positive performance months for the S&P 500 would make it to eight). The month also held true to the history of September being the worst month for performance on average since the index’s inception in 1928. There were no shortage of risks conspiring to bring the market down a notch; including ongoing debt ceiling negotiations, fiscal policy uncertainty, monetary policy uncertainty (including over whether Jerome Powell will keep his position as Fed head), global supply chain bottlenecks, slowing economic and earnings growth projections, and ongoing inflation fears. From the S&P 500’s all-time high on September 2, the drawdown through the final day of the month was -5.1%; ending a streak of 211 trading days without at least a 5% pullback—the longest since January 2018. As shown below, nearly every historically-lengthy streak without at least a 5% pullback occurred during secular bull markets (with the exception of 2004); although more than 40% ultimately turned into at least a 10% correction. For all the chatter about “the market” having been resilient this year; that really just refers to the “benchmark” S&P 500 at the index closing level. The churn and weakness under the surface has been more significant. As of last week’s close, more than 90% of the S&P 500’s constituents have had at least a 10% correction from their highs. For the NASDAQ, it’s just under 90%; while for the Russell 2000, it’s a loftier 98% (meaning nearly every small cap stock in that index has suffered at least a 10% correction from their highs this year). Source: Charles Schwab, ©Copyright 2021 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/, as of 10/1/2021. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results. Halitosis Significant breadth deterioration has been brewing for some time under the surface of the major indexes. As we’ve been highlighting since early summer, there has been a fairly steady deterioration in the percentage of stocks trading above their 200-day moving averages—including within the S&P 500, NASDAQ and Russell 2000 (first chart below). Throughout September though, there was notably more deterioration within the previously-resilient S&P 500 than either the NASDAQ or Russell 2000—especially in terms of the percentage of stocks trading above their shorter-term 50-day moving averages (second chart below). Bad Breadth Source: Charles Schwab, Bloomberg, as of 10/1/2021. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results. We have also been highlighting the rapidity with which sectors have been moving in and out of favor this year, which has led to significant divergences in terms of sector-level breadth readings. As shown below, in terms of each sector’s stocks and the percentage trading above their 50-day moving averages (blue bars), there is no starker a divergence than Energy with 100% of its names above, and Utilities with 0% of its names above. Even when looking at longer-term 200-day moving averages (yellow bars), there is a stark difference between Energy’s 95% and REITs’ 94% members trading above, and Consumer Staples’ 47% trading above (second chart below). Breadth by Sector Source: Charles Schwab, Bloomberg, as of 10/1/2021. Past performance is no guarantee of future results. “Everything rally” bids adieu Another milestone was reached as September was in its final days. The so-called “everything rally” came to an end after 290 trading days. As shown below, courtesy of our friends at Arbor Data Science, the average rolling one-year Sharpe ratio across major asset classes fell to below 1-to-1 for the first time since July 2020. As a reminder, the Sharpe ratio, developed by Nobel laureate William F. Sharpe, is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Surprise! Commodities remain the lone major asset class continuing to extend an already-extreme bullish run. Since the low in March 2020, the Bloomberg Commodity Index is up 70%. This is in keeping with inflation, which continues to run hot; and has been a volatility-driver for the equity market. As shown below, although a bit off the boil, Citi’s Inflation Surprise Index (measuring how inflation data is coming in relative to expectations) remains in the stratosphere. As detailed in the accompanying table, historical returns for the stock market tend to be lower when inflation surprises are higher. Also shown though is the historical tendency for small cap stocks to perform significantly better in those high inflation surprise zones. Inflation Surprises Easing? Source: Charles Schwab, Bloomberg, 1/31/1998-9/30/2021. The Citi Inflation Surprise Indices measure price surprises relative to market expectations. A positive reading means that inflation has been higher than expected and a negative reading that inflation has been lower than expected. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results. In contrast to inflation having been surprising on the upside, economic data has been surprising on the downside; albeit with a slight uptick recently as shown below. As with the Inflation Surprise Index above, Citi’s Economic Surprise Index is not a measure of the level of economic data readings; but a measure of how the data is coming in relative to expectations. Courtesy of some recent and notable economic data “misses,” including consumer confidence/sentiment and payroll growth, the index remains in negative territory. As detailed in the accompanying table, historical returns for the stock market tended to be lower when economic surprises are lower. Economic Surprises Bottoming? Source: Charles Schwab, Bloomberg, ©Copyright 2021 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/, as of 9/30/2021. Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. Past performance is no guarantee of future results. Also losing steam has been the widely-watched Atlanta Fed GDPNow forecast tracked, shown below. Since the initial forecast for the third quarter of more than 6% back in July, the retreat has been fairly brutal and the forecast now sits at 2.3%—in part due to the estimate for personal consumption having been cut from 2.2% to 1.4%. As shown in the chart, the estimate is now well below the Blue Chip consensus, which oddly has accelerated in the past few weeks. Source: Charles Schwab, Federal Reserve Bank of Atlanta, as of 10/1/2021. Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data. Another area of concern is around the labor market. Although job openings still exceed the number of unemployed by a hefty amount, payroll growth for August was weaker than expected. Some recent data out of the St. Louis Fed and Homebase is suggesting that there have been little-to-no job gains since August. The number of people working at small businesses fell for eight consecutive weeks during the period ending September 12 (based on a sample of ~50k businesses). A rub is that the data is not seasonally adjusted; nonetheless, the St. Louis Fed has been relying on the survey, which did correctly suggest the weaker August payroll report. Stagflation redux? The recent trends of hotter inflation data coupled with weaker economic data are bringing back stinging memories of the 1970s era of “stagflation.” We do not put ourselves in that camp given there are presently more differences than similarities between then and now. Not only was monetary policy slow to respond to the ignition of 1970s’ wage-price spiral style of inflation; those same policymakers had overly-optimistic assumptions about the economy’s supply capacity. The government’s attempt at wage, price, and credit controls to combat inflation in the 1970s did little more than cause severe distortions. Demographics and the power of trade unions were also tailwinds at the back of inflation in the 1970s. Finally, today’s productivity is head-and-shoulders above the structural productivity weakness of the 1970s. Regardless of the forces likely keeping stagflation at bay longer-term, we may be shifting to a higher plane for inflation in the medium term—especially if the pandemic continues to exacerbate already-severe supply chain bottlenecks. This inflation dynamic and changing perceptions about its trajectory looking ahead helps to explain the significant retreat in the correlation between Treasury bond yields and stock prices. Relationship trouble brewing between stocks and bonds? As shown below, for nearly the entire span between the mid-1960s and mid-to-late 1990s, the rolling 200-day correlation between bond yields and stock prices was negative. As a refresher, bond yields and bond prices move inversely. As such, when the correlation between bond yields and stock prices is negative, that means the correlation between bond prices and stock prices is positive (they move together). For much of the period since the late-1990s—and all of the time since the Global Financial Crisis—the correlation between bond yields and stock prices has been positive. But it did just recently dip into negative territory—a sustained period below the zero line might be a warning that a secular shift is underway. Stocks Now Negatively Correlated to Bond Yields Source: Charles Schwab, Bloomberg, as of 10/1/2021. Correlation is a statistical measure of how two investments have historically moved in relation to each other, and ranges from -1 to +1. A correlation of 1 indicates a perfect positive correlation, while a correlation of -1 indicates a perfect negative correlation. A correlation of zero means the assets are not correlated. Past performance is no guarantee of future results. The correlation between yields and stock prices bears watching. The multi-decade period of negative correlations spanned from the Bretton Woods era of the dollar’s ties to gold through the financial crises of 1997 and 1998 (including the Asian currency crisis and the collapse of Long-Term Capital Management). That was followed by the equity market melt-up and subsequent collapse, which ushered in the replacement of inflation fear with deflation fear. It was an environment when bond yields could rise; but because they were generally rising alongside economic growth and/or expectations—without commensurate rising inflation risks—it was also a healthy environment (generally) for equities. The inflation we’ve been experiencing may still be transitory, even if the definition of that term is longer than many thought a few months ago. The relationship between bond yields and stock prices may hold a key to figuring out just how long this transitory “phase” is likely to persist. Retail’ers One of the key reasons why pullbacks have been less prominent this year has been the dip buyers that have stepped in during each bout of weakness—particularly among retail traders/investors. Last Tuesday—the largest selloff for big tech since May—retail bought $1.9 billion worth of equities in tech/growth heavyweights. It was among the five largest net buying days since the pandemic began, according to Vanda Research. The recent trend has been for retail to buy during larger bouts of weakness—they’ve been mostly sitting out on days when the market has moved sideways. Per Vanda, that suggests that retail is not particularly thrilled about stocks right now; with only a temptation to buy dips if a “substantial” discount develops. In sum We are all keenly focused on the evolution of the post-pandemic economic and inflation landscape. The recent move up in inflation, and down in growth forecasts, has been driven by the combination of supply and demand shocks and dislocations. There are more questions—including about fiscal and monetary policy—than there are answers; and risk has undoubtedly risen for investors. It would not surprise me to see continued bouts of volatility and corrective phases. To date this year, the S&P 500 index itself has stayed out of correction territory; even if the churn and weakness under the surface has been notably weaker. We can’t rule out that the index plays some “catch down” to the weaker trends under the surface. Importantly though, to be a successful investor doesn’t require you (or me) to perfectly time volatility or corrections. As I often say, it’s not what you know (about the future) that matters, it’s what you do along the way. Heed the risk/reward benefits of diversification within and across asset classes. For stock pickers, focus on quality-based factors, including strength in earnings revisions, cash flow yields and balance sheets. I continue to believe factor-based investing will serve investors better than trying to pick consistent winners among sectors or standard style indexes. In particular, take advantage of volatility—including sector swings—by periodically rebalancing portfolios. Rebalancing is such a beautiful discipline as it “forces” investors to do what we know we’re supposed to, which is buy (add) low and sell (trim) high. Remember, neither “get in” nor “get out” is an investing strategy—that’s simply gambling on moments in time, when investing should always be a disciplined process over time." MY COMMENT Some good discussion here for those interested in data and shorter term markets. I like to keep up with what is going on day to day and week to week in the economy. BUT....that definitely does NOT mean that I am going to do anything in my account short term. I also take everything in the media about the short term with a HUGE grain of salt. I like to know what is going on....but I totally IGNORE the OPINION of what it means and why it is happening. I simply trust my own COMMON SENSE more that what I see from others. So.....for me it is all about knowing what is going on around me.....and doing NOTHING.
WOW......I just got down from the attic.......and.....looks like the markets have gone up nicely. I had the HVAC guy here to do the annual check of the heating system before winter. I like to go up there with him....I always learn something about the system. I have pretty good knowledge of AC and HEAT equipment at this point. We had one system about 15 years ago in another house that was very poorly done and had lots of issues. I learned a lot from that system. Nice to see the markets up nicely while I was up there. A good start to the day and the week if we can hold on till the close today.
the best thing about today.....there is NOTHING going on. Everything is OLD NEWS and well baked into the markets. It is nice when we see days that the markets and stocks are allowed to be the story and do what they do without breathless coverage of OUTSIDE issues.
