The Long Term Investor

I like this little article........some good points on some of the recent media commentary and negative arguments.

Bad Breadth Doesn’t Stop Bull Markets
If anything, fears about market breadth help extend stocks’ gains.

https://www.fisherinvestments.com/en-us/marketminder/bad-breadth-doesnt-stop-bull-markets

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

"Across the financial press, a common theme has begun emerging: Fewer and fewer stocks are performing well—so-called narrowing market breadth—which, to proponents, means this bull market is fragile. Don’t buy it—in our view, this is faulty logic. Narrowing breadth is normal as bull markets mature, and there is no preset level indicating the bull market’s end is near. To us, it is just another sign this less-than-two-year-old bull market is acting late stage. However, we think widespread fear of typical bull market behavior is yet another indication stocks have more room to run.

There are several different ways to measure market breadth. Some look at the number of stocks hitting new 52-week lows, which are currently far outpacing new highs. Others track the “advance-decline line”—the ratio of advancing stocks to declining ones. Early this week, some touted the fact daily NYSE and Nasdaq decliners outnumbered advancers by about four to one. Our preferred measure is the percentage of stocks outperforming the index average. For the S&P 500, this jumped to 61% during value’s early 2021 countertrend rally amid optimism over mass vaccine rollouts and global economic reopening. But it has steadily declined since last May, with only 44% now beating the index on a rolling 12-month basis. (Exhibit 1)

Exhibit 1: Narrowing Market Breadth Doesn’t Always Spell Doom

Source: Clarifi, as of 1/13/2022. Percent of S&P 500 stocks beating the trailing 12-month S&P 500 total return, 12/31/1975 – 1/12/2022.

When the current S&P 500 bull market began in March 2020, its breadth (as we define it) was below 40%. It stayed low through the rest of the year. Spring 2021’s subsequent broad-based gains weren’t unwelcome, but the narrowing breadth that followed in 2021’s second half didn’t stop the bull market, either.

Narrow breadth at the market cycle’s start is atypical. Ordinarily, during a bear market’s depths, depressed sentiment overshoots reality by miles. Many small-cap and economically sensitive value stocks—the majority of the market in numbers—crater the most. The ones surviving, though, are mostly running lean and mean, after frozen credit markets and sagging sales forced them to slash costs. This means that, as the economy revives, their earnings growth can soar off low bases. Markets, anticipating earnings’ upswing, often launch these stocks upward well before recessions officially end. This is why in standard market and business cycles, small-cap and value stocks generally lead off a bear market low—and why breadth is usually high early in a bull market. For example, coming out of 2007 – 2009’s bear market, the S&P 500’s breadth hit over 55% routinely through 2011.[ii]

Later in the cycle, after the initial upsurge, stocks settle down; the market’s winnowing process gets tougher—there are fewer winners. As the bull market matures, earnings growth tends to slow significantly. Year-over-year benchmarks become tougher to beat. Many companies reach the end of what they can squeeze out by cutting costs (largely under their control) and must rely increasingly on revenue growth (less controllable) to drive earnings. Then too, GDP growth usually slows to a more pedestrian pace after the recovery phase out of recession—as economic activity hits its prior peak and begins a new expansion phase.

At this point, it can get harder for companies to outperform. This is when large-cap and growth stocks tend to take the leadership reins, as their higher-quality characteristics shine. Because they feature strong balance sheets, high margins and growth prospects independent from the broader economy’s, they stand out from the crowd—able to generate earnings on their own accord when most others may begin to flounder. There just aren’t as many stocks with high-quality, growth traits. So breadth narrows.

That is what normally happens. But as we noted, this cycle’s breadth looks very different—narrow out of the gate with a brief bump early last year that subsided fast. In our view, this is due to the lockdown bear market’s very unusual cause—and duration. We think it was too short to reset the cycle. Ditto for the fleeting downturn’s effect on the broad economy. Contraction from lockdowns was short and sharp. It came when businesses hadn’t built up a lot of excess and inefficiency. Lockdowns—and associated government support—suspended economic activity. As those ended, the economy overall picked up where it left off. We think this is why large-cap growth stocks have led throughout—a fact supercharged early by big growth firms’ business models being very aligned with a locked-down world.

Looking back on the whole, what that leaves is a young bull market with an old soul. If you treat 2020’s lockdown-driven bear market as a hugely oversized correction, stocks are behaving as if this new bull market is a continuation of 2009 – 2020’s. Narrow breadth and growth leadership characterized the previous one as it ended. Those features reasserted themselves immediately in this one. The new bull market just resumed the same late-cycle behavior as before global lockdowns temporarily interrupted.

This time around, many fret narrow breadth makes the bull market fragile. If the few stocks leading falter, they posit, the market will plummet. But as history shows, while market breadth does narrow as bull markets age, there is no magic level indicating a problem. Look back to Exhibit 1. The S&P 500’s breadth was under 40% in 2012, 2014 and 2018. None signaled an imminent end to the bull market. In the 1990s’ bull market, breadth was below 40% through most of its latter half, hitting 24% at the market’s March 2000 peak.

In our view, fears over narrow market breadth show sentiment is far from the euphoria that typifies market tops. That euphoria pushes expectations to levels reality can’t possibly attain—and leads investors to dismiss risks. It is that feature which usually makes bull markets fragile—not narrow breadth."

MY COMMENT

YOU can not invest by statistics. YOU can not invest by platitudes. Well.....actually you can....but you will not be successful over the long term. What will lead to success is RATIONAL investing based on REALITY. That means long term investing in great companies and/or great funds.......usually index funds like the SP500.

I dont care one whit about market breadth. I dont care one whit about any of the daily statistics that are touted as being meaningful in some way. Obviously I dont care about Technical Indicators. ALL I care about is investing in GREAT COMPANIES or indexes of great companies and allowing compounding and time to do the heavy lifting.

 

Here is a little article on the investing world today.........a typical recent day in the markets.

Stock market news live updates: Stocks mixed as earnings roll in

https://finance.yahoo.com/news/stock-market-news-live-updates-january-19-2022-231244604.html

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

"Stocks were mixed on Wednesday after a broad sell-off a day earlier, as investors nervously eyed soaring bond yields and mixed earnings results from some major index components.

The S&P 500, Dow and Nasdaq lost steam after opening in positive territory. The Nasdaq Composite had closed out Tuesday's session with a drop of 2.6%, bringing it to its lowest level since October. The index also came within striking distance of a correction, typically defined as a closing level at least 10% below a recent record high.

Meanwhile, Bank of America (BAC) shares gained in early trading after the company topped estimates for quarterly loan growth and posted a jump in profits in its key consumer banking business. Procter & Gamble (PG) also rose after the company exceeded expectations in its latest results and raised its sales guidance for the full year, with higher prices from the company helping boost results.

Treasury yields built on recent gains, and the benchmark 10-year yield neared 1.9% for its highest level since January 2020. Commodity prices also advanced further, and U.S. West Texas intermediate crude oil futures rose above $86 per barrel.

According to many strategists, the recent volatility across risk assets has largely reflected investors' ongoing reassessment of highly valued asset prices, with interest rate hikes and an attenuation of liquidity out of the Federal Reserve looming.

Though Fed officials are in a blackout period before their next meeting next week, policymakers over the past several weeks have telegraphed that they are gearing up to raise interest rates and eventually draw down the nearly $9 trillion on the Fed's balance sheet as the economic recovery continues and inflation soars.

"At this point, it's very clear that the first rate hike will be at the March meeting," Jason Ware, Albion Financial Group partner and chief investment officer, told Yahoo Finance Live on Tuesday. "What we're going to be looking at is the language around inflation because at the end of the day, inflation is what's driving Fed policy."

Other strategists offered a similar take.

"I think it's definitely a repositioning of the market to deal with really what the Fed has done. And the Fed has basically created some certainty around the fact that there will be rate rises," David Bailing, Citi Global Wealth chief investment officer and head of global wealth investments, told Yahoo Finance Live on Tuesday. "Then the question is, how much do they actually release from their portfolio? And it's that that creates the enormous uncertainty."

"What we're seeing now is a broad-based reevaluation of the highest growth shares, which obviously are the most sensitive to interest rates. But what's happened is it's taking place across the board," he added. "This is going to present a buying opportunity in areas like fin tech, in areas like cybersecurity, where you have very steady growth, you have increased cash flows and potentially profitability, as opposed to the more speculative shares."

10:53 a.m. ET Kohl's shares jump to highest since November as activist pressure mounts

Kohl's (KSS) shares extended advances on Wednesday, building on Tuesday's gains as activist pressure mounted for the beleaguered retailer. The stock rose more than 6% intraday.

Earlier this week, Macellum Advisors sent a letter to Kohl’s saying the company should consider options including a potential sale if it fails to boost business enough to increase its stock price. Macellum has an about 5% stake in Kohl’s, and in its letter, urged the company to make changes including to its board. In April 2021, Kohl’s had agreed to add two of Macellum’s nominees to a board of independent directors – but the stock has slid since then.

“I know the board needs more help. I know they need a shareholder in the room that has a sense of urgency, that has a real understanding of retail and the dynamic and the competitive landscape," Macellum CEO Jonathan Duskin told Yahoo Finance Live on Tuesday. "And I think we can really be incredibly beneficial to [Kohl’s CEO Michelle Gass] and help her improve the business and turn this company around and create meaningful value for shareholders.”

Kohl’s responded to Macellum’s letter in a statement late Tuesday.

"We have continued to engage with Macellum since the settlement and are disappointed with the path they have taken and the unfounded speculation in their announcement and letter," the company said in a press release. "Our strategic plan to transform Kohl's into the leading omnichannel destination for the active and casual lifestyle continues to gain traction."

9:23 a.m. ET: Housing starts unexpectedly rose in December

Housing starts posted a surprise increase at the end of 2021, with ongoing demand for homes and apartments helping boost housing activity even as rates rose.

Housing starts rose at a seasonally adjusted annualized rate of 1.702 million in December, climbing by 1.4% compared to November's revised rate, according to Commerce Department data Wednesday. In November, new homebuilding increased at an 8.1% rate, which was downwardly revised from the 11.8% increase previously reported. Starts for multi-family homes, which comprise apartment buildings and condos, were up 10.7% to reach an annualized rate of 530,000, or the fastest since February 2020.

Building permits, which serve as a leading indicator of future homebuilding, increased by 9.1% in December, blowing past estimates. Consensus economists were looking for permits to fall by 0.8% during the month, according to Bloomberg data."

7:36 a.m. ET: Bank of America shares rise after posting solid 4Q results, led by consumer banking

Bank of America delivered fourth-quarter results that topped Wall Street's estimates on many major metrics, including in its key consumer banking business.

Total ending loan balances grew 6% to $979 billion at the end of the fourth quarter, which Bank of America attributed to strong commercial loan growth and higher card balances. In Bank of America's consumer banking division, net income grew 21% to $3.1 billion. The company also touted digital adoption of its consumer banking platforms, noting that it boasted 41.4 million active digital banking users for a rise of 5% over last year.

"Our fourth-quarter results were driven by strong organic growth, record levels of digital engagement, and an improving economy," CEO Brian Moynihan said in a press statement. "We grew loans by $51 billion and added $100 billion of deposits during the quarter, further strengthening our position as the leader in retail deposits."

Bank of America also brought in record quarterly investment banking fees of $2.4 billion. Elsewhere, however, the company also posted a drop in fixed-income trading revenue and a miss on equities trading revenue, echoing disappointing quarterly results in these business areas from other big banks including JPMorgan and Goldman Sachs from the past week.

MY COMMENT

My view is that one of the most important indicators today is the Proctor & Gamble Earnings. A nice beat of expectations and more importantly POSITIVE future guidance. This is a GUT LEVEL consumer company and with their product mix they have a pretty good idea of the general consumer economy. For them to give positive guidance is a nice thing to see. In the same vein it is nice to see the BA earnings being pushed forward by the CONSUMER side of their business. Again a general positive indicator.

The short term market action we are seeing MOSTLY reflects the Wall Street professionals. The little investors......are just siting and doing nothing....or are actually adding money. It is very difficult for the markets to be positive short term......when the so called professionals are running around with their hair on fire........like a bunch of MORONS. They dont care in the slightest about the long term. The short term insanity is their little world.

 

I see MUCH to like in these PG earnings....even though I do not own the stock.

P&G earnings top estimates as price hikes offset rising costs, company raises 2022 sales forecast

https://www.cnbc.com/2022/01/19/procter-gamble-pg-q2-2022-earnings.html

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

"Key Points

• Procter & Gamble reported fiscal second-quarter earnings and revenue that topped Wall Street’s expectations.
• The company raised its outlook for sales growth from a range of 2% to 4% to a range of 3% to 4%.
• P&G also said it expects commodity and freight costs to weigh even more heavily on its fiscal 2022 results.

Procter & Gamble on Wednesday reported quarterly earnings and revenue that topped Wall Street’s expectations as price hikes helped offset higher commodity and freight costs.

On the heels of its strong performance, the company raised its outlook for sales growth but said it expects inflation to weigh even more heavily on its fiscal 2022 results.

Shares of P&G rose 3.9% in morning trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $1.66 vs. $1.65 expected
• Revenue: $20.95 billion vs. $20.34 billion expected

The consumer giant reported fiscal second-quarter net income of $4.22 billion, or $1.66 per share, up from $3.85 billion, or $1.47 per share, a year earlier. Analysts surveyed by Refinitiv were expecting $1.65 per share.

Net sales rose 6% to $20.95 billion, topping expectations of $20.34 billion. Organic revenue, which strips out the impact of foreign currency, acquisitions and divestitures, also rose 6% in the quarter. About half of that growth came from the benefit of raising prices on select products.

“While it’s very early for these commodity-based price increases, to date, we see positive signs,” CEO Jon Moeller said Wednesday on CNBC’s “Squawk Box.” “Probably 20% to 30% less price elasticity than we were expecting, and if you look at, for example, private-label market shares — private label being the lowest price offered on the market — they’re down.”

More price increases are on the way. Executives told analysts on the conference call that they already told retailers about increases planed for fabric care products, like Tide detergent and Downy dryer sheets, slated to take effect Feb. 28. In mid-April, P&G will raise prices on some of its personal health care products.

P&G’s health-care and fabric and home-care segments both saw organic sales jump 8%, tying for the highest of its divisions. The company said a more intense flu and cold season propelled organic sales for its personal health-care business by 20% for the quarter, lifting demand for Vicks and ZzzQuil products. Its oral-care products, which include Oral-B toothbrushes and Crest toothpaste, got a boost from price increases.

Price hikes also helped P&G’s home-care segment, which includes Febreze and Mr. Clean. The pandemic has created more demand for cleaning products. P&G’s fabric-care business saw double-digit growth, thanks to strong sales of fabric enhancers and laundry detergent pods.

The company’s grooming division, which includes Venus and Gillette, saw organic sales jump 5%. The segment has struggled in recent years due to increased competition and shaving trends, but price hikes helped sales this quarter.

Organic sales of the company’s baby, feminine and family care segment rose 5% in the quarter, largely due to higher prices. The division includes Pampers diapers, Charmin toilet paper and Bounty paper towels.

P&G’s beauty segment reported the smallest organic sales change for the quarter, rising just 2%. But the company is looking to improve those results with three acquisitions in the category over the last three months, snapping up Farmacy Beauty, hair-care brand Ouai and Tula Skincare.

“All of those focus on the premium channel in the U.S., so that’s an opportunity for us,” CFO Andre Schulten said on a call with journalists. “We’ve successfully done these integrations, when you think about First Aid Beauty or Native [deodorant].”

For fiscal 2022, P&G is now calling for 3% to 4% sales growth, up from its prior forecast of 2% to 4%. It also plans to boost its stock buybacks for the fiscal year from a range of $7 billion to $9 billion to a range of $9 billion to $10 billion. But the company didn’t change its outlook for earnings as it also predicted higher costs.

For the second consecutive quarter, P&G increased its inflation forecast. The company expects to pay $2.3 billion after tax in commodity costs and $300 million after tax for higher freight costs, up from last quarter’s outlook of $2.1 billion on commodities and $200 million on freight. Combined with a $200 million hit from foreign currency, P&G is forecasting a $2.8 million headwind, or $1.10 per share, to its fiscal 2022 earnings compared with the year prior."

MY COMMENT

As one of the first BIG CAP companies to report that is NOT a bank.....I see this report as an indicator that the earnings season may end up being another big beat of the expectations. I especially like their view of their future prospects.

 

Personally.....I am using the first market day of the year as my reference for when we hit a correction. As we head toward correction territory for 2022......a drop of 10% to 20% in the averages.......it is very important to keep in mind that corrections are......NORMAL. We usually see one or two every year.

 

I missed the close today. At the last minute I got a call from an acquaintance asking if I would submit a photo of a painting......as one of four........ for an Art Magazine article. So I had to go and drag the 13 foot stepladder into the house and get the painting down. They have a February first deadline so I had to than drive in to the photo center to have some photos done and processing done so they can email the photo to the magazine tomorrow. I am glad to do it since it is good PR for the painting.

As to the markets.......red.....as usual today for me. I actually had two....yes two.....stocks UP today.....Microsoft and Costco. I still gott beat by the SP500 by 0.20% for the day.

 

For those that want to use the last high in November as the starting point.....the NASDAQ is now in a correction.

The Nasdaq Composite just logged its 66th correction since 1971—here’s what history says happens next in the stock market

https://www.marketwatch.com/story/n...o-perform-afterward-11642623639?siteid=yhoof2

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

"The Nasdaq Composite Index COMP, -1.15% on Wednesday booked its first close in correction territory since March with a rapid surge in Treasury yields, and expectations for interest-rate increases from the Federal Reserve blamed for the weakness in the once-highflying benchmark.

The technology-heavy index is off to a terrible start, down 8.3% so far in 2022, closing out Wednesday down 1.2% at 14,340.26, putting it down 10.69% below its Nov. 19 record peak, and meeting the common definition for a correction in an asset’s value.


The benchmark also finished below its 200-day moving average for the first time since April of 2020 on Tuesday.

The index has registered a correction, as defined, 65 times (not including Wednesday’s) since it was first launched in 1971 and of those corrections, 24 of them, or 37%, have resulted in bear markets, or declines of at least 20% from a recent peak.

More recently, corrections have served as buying opportunities, with the sojourn into correction on March 8 resulting in subsequent gains for the one-week, two-week, three week, one-month, periods, going all the way out to six months. A similar uptrend took hold when the Nasdaq Composite slipped into correction territory in early September of 2020.



Dow Jones Market Data
Looking more broadly at the performance of the Nasdaq Composite over the past 65 times it has fallen 10% from a peak, it has finished positive on average, up 0.8%, in the week after, but returns over that first month are weak, until the benchmark breaks through into the three-month period and beyond, where average gains are 2.2%.


Dow Jones Market Data
U.S. stocks have been falling since the start of the year, with the Dow Jones Industrial Average DJIA, -0.96% and the S&P 500 index SPX, -0.97% all down sharply in the month to date, as Treasury yields rise in anticipation of the Federal Reserve tightening monetary policy this year. The rate-setting Federal Open Market Committee next meets on Jan. 25-26 and is likely to set the stage for a series of rate increases, and policy tightenings as it combats inflation.

With the policy meeting looming, the yield on the 10-year Treasury note BX:TMUBMUSD10Y was trading around 1.83% on Wednesday, while the 2-year Treasury note BX:TMUBMUSD02Y, which is more sensitive to Fed policy expectations, also has been on the ascent.

Rising yields are weighing on yield-sensitive tech stocks and growth themed areas of the market as a rapid rise in interest rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued, and that is causing a broad recalibration of tech and tech-related shares that populate the Nasdaq."

MY COMMENT

I prefer to measure a correction from the start of the new year. It just seems more accurate to me as a measure of the current markets compared to going back to November. BUT.....it really does not matter. either way we are seeing a DISMAL start to the new year. By my measure we are down by (-8.34%) in the NASDAQ.

In the end I dont think how you look at it will matter since I believe it is just a matter of time till the NASDAQ hits correction territory under even my measure. The real question is going to be....how low do we go. I can see us going well toward minus 15% to 20%....with the potential.....for even more. I dont see a lot of psychological strength in the markets right now.

It will probably be earnings that determine how low we go and where we stop. This is NOT a shocking event.......simply a past due correction that is OBVIOUSLY being caused by the anticipated actions of the FED. So.....

I continue to be fully invested for the long term as usual. After all....what else is there to do?

 

For those drawing money out of IRA accounts or 401K accounts that are subject to REQUIRED MINIMUM DISTRIBUTIONS.....you might want to read this little article.

Here’s how the new IRS life expectancy tables affect required withdrawals from IRAs, 401(k) plans

https://www.cnbc.com/2022/01/19/how...es-affect-required-withdrawals-from-iras.html