The Long Term Investor

A FINE day to start the new week. I was nicely in the green today. It was a tale of two markets for me. In the red were the TECH GIANTS that will report this week.....Apple....Amazon....Microsoft....and Google. In the green was everything else...mostly non-tech stocks. Holdings that were UP over 1% and carried my portfolio today were....Costco...Home Depot....Tesla....and Nvidia.

I beat the SP500 today by 0.30%.

 

Speaking of Tesla.....my Tesla buy-in last Friday is now UP by 13.68% is less than two days.

I take no credit....simply lucky timing. BUT....it is nice to start out with a cushion. Now....it becomes a long term holding in my portfolio.

 

Here is the first of the BIG BOYS that report this week.

Facebook shares rise as investors focus on earnings beat and look past whistleblower document dump

https://www.cnbc.com/2021/10/25/facebook-fb-q3-earnings-report.html

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

"Key Points

• Facebook shares rose in extended trading Monday after the company reported better-than-expected third-quarter earnings while revenue missed estimates.
• The company announced its plans to break out its Facebook Reality Labs into its own reporting segment starting in the fourth quarter.
• Facebook said it expects fourth-quarter revenue of $31.5 billion to $34 billion. Analysts were expecting sales of $34.8 billion.

Facebook investors shrugged off the massive ongoing document dump on Monday and instead focused on the company’s third-quarter earnings, which topped analysts’ estimates.

The company said it’s adding $50 billion to its stock buyback program, helping lift the shares about 2% in extended trading.

Here are the results.

• Earnings: $3.22 vs.$3.19 per share expected by analysts, according to Refinitiv.
• Revenue: $29.01 billion vs. $29.57 billion expected by analysts, according to Refinitiv.
• Daily active users (DAUs): 1.93 billion vs. 1.93 billion expected by analysts, according to StreetAccount.
• Monthly active users (MAUs): 2.91 billion vs. 2.93 billion expected by analysts, according to StreetAccount.
• Average revenue per user (ARPU): $10.00 vs. $10.15 expected by analysts, according to StreetAccount.

Facebook will make significant changes in the next year to focus more on its full-screen video Reels feature, which competes directly with TikTok, CEO Mark Zuckerberg told analysts on the earnings call. It’s part of an effort to make Facebook and Instagram more appealing to users between the ages of 18 and 29.

“Over the last decade as the audience that uses our apps has expanded so much and we focus on serving everyone, our services have gotten dialed to be the best for the most people who use them rather than specifically for young adults,” Zuckerberg said.

He warned that “this shift will take years, not months, to fully execute” and that ultimately it will be as significant to Facebook as the adoption of the News Feed and Stories features.

“Reels has the potential to be something of that scale,” he said.

Zuckerberg kicked off the earnings call with a vehement defense of his company, following an onslaught of reports that stemmed from documents leaked by Frances Haugen, a whistleblower and former employee.

The internal company documents released by Haugen showed that the number of teenage users of the Facebook app in the U.S. has declined by 13% since 2019, with a projected drop of 45% over the next two years. The number of users between the ages of 20 and 30 was expected to decline by 4% during that time frame, the documents showed.

Haugen initially shared documents with The Wall Street Journal, which published a series of news stories based on them. She appeared before a Senate panel earlier this month to testify about her experiences at the company. Since then, Haugen has released documents to several more news outlets, leading to additional news stories.

The reports show that Facebook is aware of many of the harms its apps and services cause, particularly to teenage girls, but either doesn’t rectify the issues or struggles to address them. More documents are expected to be shared daily over the coming weeks.

Zuckerberg rebutted the claims and referred to the latest news cycle as “a coordinated effort to selectively use leaked documents to paint a false picture of our company.”

He touted Facebook’s investments in research and said the rest of the industry should follow its lead.

“The reality is social media is not the main driver of these issues and probably can’t fix them by itself either,” Zuckerberg said. “We should want every other company in our industry to make the investments and achieve the results that we have.”

The metaverse is coming
Facebook is priming investors for a company that could look very different than the advertising-based business of today.

The company announced its plans to break out Facebook Reality Labs into its own reporting segment starting in the fourth quarter. That unit focuses on hardware, augmented reality and virtual reality products. The other revenue segment will come from its family of apps, which include Facebook, Instagram, Messenger, WhatsApp and other services.

Facebook expects its investment in the hardware and VR segment to reduce operating profit in 2021 by approximately $10 billion.

In July, Facebook announced the formation of a team that would work on the metaverse — digital worlds in which multiple people can interact within a 3D environment. Two months later, the company said it would elevate Andrew “Boz” Bosworth, who is currently the head of Facebook’s hardware division, to the role of chief technology officer in 2022.

In the meantime, the ad business keeps growing at a healthy clip.

Facebook said revenue in the third quarter rose 35% from a year earlier, while net income rose 17% to $9.2 billion, from $7.8 billion a year prior.

‘Headwinds’ from iOS
The company said it expects fourth-quarter revenue of $31.5 billion to $34 billion. Analysts were projecting sales of $34.8 billion. Facebook said the forecast “reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS 14 changes, and macroeconomic and COVID-related factors.”

Apple introduced privacy changes earlier this year, adding prompts that allow users to keep from being targeted with ads on apps. Snap shares plunged 27% on its earnings report last week after the company blamed the iOS changes for a disruption to its business.

Facebook CFO Dave Wehner said the iOS changes were the “largest headwind” in the quarter and, if not for that, “we would have expected sequential growth from Q2 to Q3.”

The iOS changes hurt Facebook’s ability to target ads to users and, as a result, “we don’t see the same level of conversion data coming through,” Sheryl Sandberg, Facebook’s operating chief, said on the call. Facebook will rebuild its targeting and optimization systems to work with less data, a process that will take multiple years, she said.

Sandberg told analysts that the company experienced slowing e-commerce growth as more businesses open up from the Covid-19 shutdowns and consumers return to making purchases in person.

“Businesses are still making the shift online, but e-commerce is no longer growing at the pace it was at the height of the pandemic,” Sandberg said.

Sandberg also noted that advertisers have slowed spending in response to global supply chain issues and labor shortages. Still, Sandberg said, Facebook remains “the best platform for advertisers to reach people where they are and get measurable outcomes.”

Revenue from Facebook’s “other” segment, including consumer hardware such as Oculus virtual reality headsets, totaled $734 million, up 195% and more than the $477 million StreetAccount consensus estimate.

The company’s free cash flow of $9.55 billion fell short of the $9.9 billion StreetAccount consensus.

Facebook said in the third quarter it had 3.58 billion monthly users across its family of apps, up from 3.51 billion in the second quarter. This metric is used to measure Facebook’s total user base across its main app, Instagram, Messenger and Whatsapp."

MY COMMENT

I guess investors in this company were satisfied since the stock is up after-hours. To me......as a non-shareholder.....the earnings look pretty MEDIOCRE.

Revenue......missed. Daily users....as expected. Monthly active users....missed. Average revenue per user....missed.

I continue to have absolutely......ZERO.....interest in this company.

 

Tomorrow we continue with BIG earnings with Google....AMD.....and Microsoft....reporting.

 

HERE is another indicator of what happens when you invest in companies that are basically OWNED by the most brutal communist dictatorship in the world.

Alibaba Has Lost $344 Billion in World's Biggest Wipeout

https://finance.yahoo.com/news/alibaba-value-drop-tops-world-041606176.html

(BOLD is my opinion OR what I consider important content)
"(Bloomberg) -- Few people could have predicted the downward spiral for Alibaba Group Holding, when founder Jack Ma delivered a blunt criticism of China’s financial system last October.

Yet one year on, the technology titan has lost a whopping $344 billion in market capitalization -- the biggest wipe-out of shareholder value globally, according to data compiled by Bloomberg. Shortly after the now infamous speech, Beijing suspended the listing of its fintech arm Ant Group and has since followed up with a widespread crackdown on the country’s most vibrant sectors -- causing Chinese stocks to tank.

Alibaba shares sank from an all-time high that month to a record low three weeks ago in Hong Kong, as Beijing stepped up its scrutiny of the company’s practices and urged a restructure of its fintech business. Despite a 30% recovery from Oct. 5, the stock is still 43% lower than its October 2020 peak.

Bloomberg Intelligence expects fiscal second-quarter active users at the e-commerce giant to have beaten consensus projections as a result of China’s zero-Covid policy. Alibaba is set to report earnings on Nov. 5."

MY COMMENT

What a shame for all the investors that jumped on this up and coming company. UNFORTUNATELY......the company is totally under the control of the Chinese dictatorship....as are ALL companies in China. A sobering lesson for investors now and in the future. You can not trust Chinese companies.

 

HERE is a......."financial"......not political.......article about the new tax proposal.

The Many Problems With Taxing Unrealized Capital Gains
The White House’s Office for Management and Budget’s logically flawed redefinition of income leads to some headline-drawing conclusions, but it isn’t likely to lead to new laws.

https://www.fisherinvestments.com/e...problems-with-taxing-unrealized-capital-gains

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



"Editors’ Note: MarketMinder is politically agnostic. We favor no politician nor any political party and assess policies’ potential impact on the economy, markets and personal finance only.

As part of its push to raise taxes on affluent Americans, the White House released a report late in September that purported to show the real estimate of the “average federal income tax rate on the wealthiest Americans.” Now, the last I checked, the income tax rate was, you know, the tax rate paid on income—like the salary I make writing articles for Fisher Investments. This is the gist of the entirety of the US tax code. But economists from the Office for Management and Budget (OMB) see it differently, apparently. Their report redefined income as the increase in wealth from one year to the next—a bizarre methodology that introduces a lot of oddities, in my view. This would be a mere academic curiosity if Congressional Democrats weren’t jawboning about taxing wealthy individuals’ unrealized capital gains as they scramble to rewrite the reconciliation budget bill. While it is far from certain that this becomes law—and probably isn’t inherently bearish for stocks if it does—it is worth exploring the problems such an effort could create.

Much of the current push stems from the notion that wealthy people aren’t paying their “fair share,” which the OMB’s analysis aimed to demonstrate. It estimated “the average Federal individual income tax rate paid by America’s 400 wealthiest families, using a relatively comprehensive measure of their income that includes income from unsold stock.” (Italics mine.) Lest you think that means dividends, they go on: “An important feature of our analysis that is less common in existing estimates of tax rates is that we include untaxed (‘unrealized’) capital gains income in our more comprehensive income measure as they accrue.” As they explain it, “The wealthy pay low income tax rates, year after year, for two primary reasons. First, much of their income is taxed at preferred rates. In particular, income from dividends and from stock sales is taxed at a maximum of 20 percent (23.8 percent including the net investment income tax), which is much lower than the maximum 37 percent (40.8 percent) ordinary rate that applies to other income.” Hence, the OMB’s staffers claim the wealthy paid, “an average Federal individual income tax rate of 8.2 percent for the period 2010-2018.” Getting to that figure, though, requires redefining income altogether—and changing how they approach capital gains, too. Taxing unrealized gains as they accrue—which Congressional Democrats have said is on the table for America’s billionaires—or removing the tax code provision allowing heirs to inherit investments without inheriting the original cost basis (known as the cost basis step-up at death), are the purported solutions to this alleged conundrum.

Thing is, these families are not sitting on mountains of gold coins like Scrooge McDuck. Their wealth is predominantly assets—illiquid (businesses, art) and liquid (stocks, bonds). Increases to that wealth exist on paper only. The current proposal to tax unrealized gains would include real estate, which is also quite illiquid—you can’t sell it in a minute and expect to get fair value. Nor is there a way of tracking its market value day by day. Like all illiquid assets, rising property values are one step away from imaginary. Every asset, liquid or illiquid, is worth only what someone will pay for it. Taxing the transaction, in my view, is the only logical and objective way to do it. This is doubly true for illiquid assets. Someone will have to guesstimate the value of these potentially unique pieces of property. (Does anyone actually think that couldn’t be gamed?)

Plus, there are two simple reasons capital gains taxes have preferred rates. One is incentivizing long-term investment, which drives job creation. The other is to account for inflation, which can offset a large chunk of long-term returns. Preferential rates help people avoid taking inflation-adjusted losses on their investments, which would skew the risk/reward calculation.

Congressional Democrats have said their proposed tax would apply only to billionaires or people with $100 million in income (defined the standard way, we presume) for three straight years. So at least on paper, it would exclude family farmers, dentists and pediatricians with private practices, shop owners and other people who might be independently wealthy on paper but have little actual liquid net worth. Yet applying the tax only to billionaires and mega-high earners would be impossible and probably illegal. For one, people would ensure they never earned $100 million three years in a row, which would leave net worth as the determinant. That could very well fail the apportionment test by targeting individuals directly. It would also be rife for legal challenge if someone thought their real estate holdings were worth only $998 million but government assessors disagreed. More likely, if experience is a reasonable guide, any passable tax would have an income threshold that would ensnare far more people.

Now, not everyone subject to a tax on unrealized gains has illiquid assets only—it would also apply to those with large holdings of publicly traded stocks. That it is theoretically easier for them to raise the cash needed to pay the tax doesn’t make it any more sensible. When you own stock, you own a company’s future earnings. Those earnings are—wait for it—post-tax. They are already diminished by corporate taxes. Some economists already argue paying capital gains taxes on realized gains amounts to double taxation. (Ditto for dividends.) But forcing people to sell stocks in order to pay Uncle Sam for their unrealized gains forces them to make moves that run counter to their long-term investment goals and preferred portfolio strategy. It is basically a giveaway to overseas institutional investors, who would be the logical buyers.

Ending the cost basis step up, which remains a topic of discussion among progressives, doesn’t make much more sense. If it applies to all assets—liquid and illiquid—we come back to the difficult issue of calculating the actual cost basis. Pretend a dentist named Dr. Driller paid $10,000 for his dental practice in 1970 and was still filling cavities as the owner-operator of that practice when he passed away last month, leaving the practice to his dentist daughter, Dr. Crown. The practice is now worth about $1 million. If the stepped-up basis goes away, what is her actual cost basis? The $10,000 her father paid? That doesn’t include the tens of thousands of dollars he spent on improvements over the years. Does she even have access to all the handwritten ledgers that would track those expenses?

One reason the stepped-up basis exists is to account for the lack of recordkeeping on all these items, including the initial purchase. That applies to stocks as well. Many of us know someone whose stock holdings’ cost basis is an utter mystery thanks to the technology and record-keeping in use at the time of purchase. Loads of investors hold on to stocks simply because calculating the tax bill would require digging up ancient paper trade confirmations and then adjusting prices for splits and mergers over many years. If you can leave such assets to your heirs at market value on the date you die, at least you can be confident that they won’t need a forensic accountant just to pay their taxes whenever they sell.

Proponents of removing the cost basis step up argue it would raise needed government revenue. Well, maybe, depending on your definition of the word “needed” and your views on how incentives affect behavior. But one thing that does seem painfully obvious is that the huge compliance burden would funnel mountains of money and energy to accountants. Is that really the best use of productive capital? What businesses and opportunities would miss out? Folks, this is the Broken Window Fallacy at work.

Then too, incentives do matter. If you tax long-term wealth creation, it stands to reason you will get less of it. If you tax entrepreneurship, you will get less of it. Most of all, if you make an heir pay taxes on a deceased individual’s long-term gains, you are taxing that deceased person’s discipline, patience, careful planning and faith in the American capitalist system. Considering many of these same politicians decry investors’ alleged short-termism, discouraging long-term investing is a very odd position to take.

Now, anyone who has been watching the “progress” of the bipartisan infrastructure bill and the associated reconciliation bill in Congress is probably pretty well aware that changes to the US tax code—particularly those redefining long-standing principles of taxation—are unlikely to simply sail through Congress into law. Even if we limit the measures to those targeting billionaires (which are, again, of questionable constitutionality), it may be a challenge to get all 50 Democratic senators and near-unanimity in the House to pass it. Still, should they do so, the measures are small—with most of the bigger tax moves like corporate tax hikes diluted or ditched as talks drag on. Given the fear of such moves early this year, that seems like gridlock delivering a pretty bullish treat for investors as Halloween draws near."

MY COMMENT

As you can see above the entire argument that certain "RICH" people are paying far less than regular people in taxes is TOTALLY FLAWED. The supposed tax rate of the "RICH" has been calculated by using....unrealized and untaxed capital gains as part of their income. The argument in favor of this sort of tax increase is based on......FALSEHOOD.

LUCKILY this stuff is not likely to pass. BUT.....who knows. It is definately being PUSHED at the moment. It is as though these people want to destroy the entire basis for our economy and business. It is simply GREED.....not on the part of the RICH....but....on the part of government,

As Elon Musk tweeted this morning in response to the LUNACY:

"Eventually, they run out of other people’s money and then they come for you,"......... Musk tweeted.

Once this CAMEL gets its nose under the tent......they will.....COME FOR EVERYONE. It is just a matter of time.

 

A STELLAR open today with all the averages in the green to start. And.....TESLA takes off again. The stock is on a PR and NEWS driven move.

Waiting breathlessly for those BIG TECH earnings today.

 

I like that you are......find tuning.......your portfolio Zukodany. You have now been investing for long enough to be able to do so. Too many people just buy a bunch of stocks and than sit on them. LONG TERM......is good....but that does not mean you never evaluate performance and take action where needed to better and fine tune what you own.

 

Well......I try to get a little drama into the thread.

 

The markets have the potential to BOOM today and this week.

Stock market news live updates: S&P 500, Dow log fresh all-time highs amid earnings

https://finance.yahoo.com/news/stock-market-news-live-updates-october-26-2021-221500971.html

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

"Stocks extended gains to set fresh record highs on Tuesday as investors took in another hefty set of earnings and economic data.

All three major U.S. equity indexes moved higher. The S&P 500 and Dow each set all-time intraday highs, with equity investors proving resilient even in the face of ongoing supply chain challenges and elevated inflationary pressures.

The Nasdaq Composite also rose, coming within 1% of its own record high. Shares of Tesla (TSLA) rallied to add to gains and extend the stock's market capitalization further above $1 trillion. Technology stocks also gained broadly as investors awaited earnings results from the likes of Alphabet (GOOGL), Twitter (TWTR) and Advanced Micro Devices (AMD) on Tuesday, and other tech heavyweights including Amazon (AMZN) and Apple (AAPL) later this week.

Facebook (FB) shares gained in early trading even after the company posted mixed third-quarter results and revenue guidance that missed expectations. The social media giant also said it would be changing its reporting structure to break out Facebook Reality Labs in its own separate segment, following the company's ample investment in building out its virtual reality products and metaverse. It noted it expected investment in Facebook Reality Labs to reduce overall operating profit by about $10 billion this year.

Stocks have jumped so far in October as investors at least temporarily shook off concerns over rising input and labor costs, and widespread shortages, for companies across a broad range of industries. Even given these pressures, many companies have managed to exceed Wall Street's earnings expectations in their latest quarterly results, which largely reflected companies' abilities to absorb or pass on heightened costs at least for the time being.

With earnings rolling in this month, the S&P 500 has so far gained 6% in October, and is heading for its best month since November 2020.

"The S&P 500 Index has gained more than 20% so far this year, making more than 50 record highs along the way. Certainly nobody should be upset with that return if that was all 2021 brought us," Ryan Detrick, Chief Market Strategist for LPL Financial, wrote in an email. "However, we see signs that there could be more gains to come in the final two months of the year."

"Seasonal tailwinds, improving market internals, and clear signs of a peak in the Delta variant all provide potential fuel for equities heading into year-end, and we maintain our overweight equities recommendation as a result," he added.

9:03 a.m. ET: Home prices jumped by the most on record in August: Case-Shiller

U.S. home prices increased at a faster rate in August than in July, reaching yet another record-high clip as tight inventory levels and materials and labor shortages further squeezed affordability in the housing market.

S&P CoreLogic's Case-Shiller Home Price Index for August rose at an 19.84% rate compared to the same month in 2020. This accelerated from July's year-over-year increase of 19.75%.

The 20-City Composite Index, tracking home price changes in the largest U.S. metropolitan areas, increased at a 1.17% month-on-month clip in August, and at a 19.66% year-over-year rate. Both pulled back slightly compared to the prior month. In July, the 20-City Composite Index had risen by 1.53% on a monthly basis, and by 20.02% on an annual basis. "

MY COMMENT

LETS GO. It is time for a CRAZY market melt up. Well not too crazy if it is actually based on earnings data.

Just a reminder.......remember all the articles and experts telling us how earnings were likely to be an issue this time around? Remember all the......fear mongering and doom and gloom......over the past month or two?

We are seeing the POWER of long term investing......right now.

 

I was thinking about my investing history with TESLA this morning.

The first time I bought it the stock was near a high. In fact many will remember that I was the:

MORON that just bought Tesla and I should have my posting privileges revoked for doing so at that price.

Of course.....the stock than went on an EPIC RUN UP.....from there....gaining hundreds of dollars.

Now.....I bought Tesla last Friday. AND....here we are now two days later and the stock is UP by nearly 21% in just two days since I bought.

I think I am the ......FORREST GUMP....of Tesla. Or perhaps.....Alfred E Neuman....."what me worry". I claim no credit.....but I will take the money.

 

Yes.....I am glad to see you pruning and adjusting your portfolio for the long term Zukodany. You got into investing during a very extreme and unusual time....the pandemic. You have done a good job.

AND....I agree.....we might see an EPIC RALLY.....but that does not mean you go CRAZY as an investor. The name of the game is STILL fundamental business based investing. It is not necessarily time to just jump on some stock because it is HOT. The words of the day.....REALITY....REASONABLE.....PROBABILITY.....RATIONAL......LONG TERM POTENTIAL.

 

I see my short term luck has ended with Tesla. Bummer. What goes up………must come back down.