The Long Term Investor

Way to go Emmett. You are single hand-idly saving the markets today. Ask your market contacts to give us another good day tomorrow.

 

I have been running around today working on photos of a painting. I have some time to do a few posts and than I am off to the photo imaging place to pick up the two paintings that I left there yesterday. Nothing like a last minute deadline. I have not even looked at my account today and doubt that I will get a chance to look at it before the close. I am COUNTING ON Emmett to take care of my account today and tomorrow.

 

Here is the latest economic data that no one will care about.

US jobless claims rise to 3-month high

https://finance.yahoo.com/news/weekly-unemployment-claims-week-ended-jan-15-2022-200147927.html

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

"Weekly new jobless claims unexpectedly jumped last week by the most since October, with some renewed virus-related disruptions at least temporarily impeding the labor market's recovery.

The Labor Department released its latest weekly jobless claims report Thursday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:

• Initial jobless claims, week ended Jan. 15: 286,000vs. 225,000 expected and a revised 231,000 during prior week
  
• Continuing claims, week ended Jan. 8: 1.635 million vs. 1.563 million expected and a revised 1.551 million during prior week
  

Initial unemployment claims rose for a third straight week, coming in near the 300,000 level. This represented some backsliding from recent progress in the trajectory of jobless claims. Claims had reached a 52-year low of 188,000 in December, as many employers attempted to keep their existing workforces in the face of widespread labor shortages.

Continuing claims also came in higher-than-expected in the most recent data. These claims, which tracks filers still collecting regular state unemployment benefits, rose by more than 1.6 million in mid-January. Still, continuing claims had come in at the lowest level since 1973 just a week earlier.

The most recent move higher in new claims may be due to some impacts from the Omicron variant and ultimately prove temporary, according to some economists.

"After having notched the lowest levels in decades, new claims are moving in the wrong direction. Omicron deserves suspicion for some new job loss, with pressures being seen both on the labor demand and supply sides," Mark Hamrick, Bankrate.com senior economic analyst, wrote in an email Thursday. "Because of the pandemic, some workers have been sidelined and no doubt some businesses have been negatively impacted by this latest wave of the pandemic."

And even without the latest pressures from the virus, the labor market had already been considerably tight heading into 2022, representing one of many supply-side challenges for companies.

"Transportation and labor markets remain tight, availability of materials remain stretched in some categories and in some markets, inflationary pressures are broad-based with little signs of near-term relief," Procter & Gamble Chief Financial Officer Andre Schulten said during the company's earnings call Wednesday.

Still, competition for labor has also presented opportunities and additional leverage for workers. Wages last rose at 4.7% on an annual basis in December, according to the latest monthly Labor Department data. And some of the biggest corporations in the U.S. including JPMorgan and Goldman Sachs have already reported higher compensation costs in their latest quarterly results, largely as a bid to attract and retain talent.

"The consumer has $2 trillion more on their balance sheet, their home prices are up, asset prices are up, jobs are plentiful, wages are going up, which is good for them," JPMorgan CEO Jamie Dimon said during the firm's earnings call last week. "We're not against that ... the consumer is in really good shape." "

MY COMMENT

The economy is much softer and more fragile than many people think....that is my view. We are FAR from being back to normal. I still say at least 12-18 months from here......and......I keep sliding that time period forward every month.

I hope the FED takes it easy on the rate increases. I have seen a lot of comments and speculation lately that they might do 6 or 7 or 8 or more increases in 2022. I call BALONEY.......if they go slow they are going to see that the economy is very delicate and that the number of increases needs to be held to a minimum and spread about 3 months apart. If they go too fast we will end up in a FED CAUSED recession. Unfortunately....nearly every recession over the past 40 years has been caused or contributed to by the FED.

 

I like the TONE of this little article.
Why the Nasdaq in correction territory may be a short-term buy signal

https://finance.yahoo.com/news/why-...may-be-a-short-term-buy-signal-185508105.html

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

"The Nasdaq Composite (^IXIC) finally slipped into correction territory Wednesday for the first time since March 2021 — prompting bearish headlines and warnings from pundits. But a Yahoo Finance analysis of nearly 50 years of Nasdaq data reveals this may be a short-term buying opportunity.

A market correction is traditionally identified as a drop of 10% or more from a recent high, measured from the closing high to the closing low. The threshold is admittedly arbitrary, but nevertheless it generates headlines and draws investor attention.

Going back to 1973, there have been 27 times when the Nasdaq fell into correction. Through 1996, the following day's returns tended to be negative. But since 1997, the day after has been positive 13 out of 14 times, for an average return of 1.78% and a median return of 2.09% (which, incidentally was the high intraday return on Thursday as of noon ET). Looking ahead to the 5-day return, it has averaged 2.83% since 1997 with a median return of 2.97%.


Returns after Nasdaq Drops into
There's a 15-year gap in the above table from roughly 2000 to 2015 because the Nasdaq was not making record highs during this time — having been beaten down by the tech bubble crash. Substituting the 52-week high — or the highest price in a year — produces a larger sample size.

From 1997, there are 22 Nasdaq corrections from 52-week highs, of which 16 produced positive returns the next day, with the next five days positive 19 out of 22 times. The average and median gains are lower for this group, but still compelling with a 2.54% average return and 2.70% median return after five days.

While the price behavior could be simply random, many short-term traders like to fade — or take the opposite position — from a prominent bullish or bearish indicator. That's because short-term sentiment may have become extreme in one direction or the other.


Returns after Nasdaq Drops into
Similarly, when the 50-day moving average crosses below the 200-day moving average, it generates a so-called death cross. While this is long-term bearish, the market will often consolidate or bounce in the short term after the signal is generated. Traders also like to fade, or take a position contrary to, high-profile magazine covers, such as the August 1979 cover of Business Week that famously declared the "Death of Equities." Buying the S&P 500 back then set up a 200% rally into 1987.

To be sure, markets face a number of headwinds this year that are likely to frustrate both retail and institutional investors alike — surging inflation, a hawkish Federal Reserve, geopolitical tensions, plus COVID.

As the Nasdaq was set to issue its bearish technical warning Wednesday, Heritage Capital President Paul Schatz gave his market outlook for 2022 on Yahoo Finance Live. "[M]y roadmap would be something like a pullback in the first quarter. We regain it in the second quarter," he said. "The bigger decline comes in the third quarter. We regain it in the fourth quarter. The year is all about patience, frustration, and quality. So that could be a fun year.""

MY COMMENT

YES.....a fun year indeed. BUT corrections are simply normal market behavior. Nothing goes straight up all the time. they are part of a healthy market process. I STILL have great HOPE for this year. there is no way to anticipate what is going to happen and there is no way to CAPTURE all the gains that are going to come in the future if you are not in the markets.

 

Yeah.....I was on the way to the photo place listening to the Business Radio....Charles Payne. He started talking about Pelaton about 1:50 to 2:00. Immediately after he was done with them....the markets started to tank. I put a lot of the blame today on Pelaton....not that it matters.

It just shows that young companies.....that are often unprofitable....with some new great product....often go into the tank after they establish the market and everyone else piles in and puts them under.

I try to AVOID these sorts of FLASH companies....the next great thing after sliced bread. Just like all the pandemic companies. Not for me....I prefer the established names. Although in a down short term market like this one.....the markets just want to go down and they are going to go down.

I am currently down by (-9.52%) for the year to date. I fully expect like many on here that this drop has a ways to go. I am thinking at least down by 15% to 20%. AND....we might even dip into Bear Market territory......over 20% down.

 

I was in the red again today....of course. I also got beat by the SP500 by 0.64%. Just a psychologically negative start to the year with potential to snowball from here.

 

For those not aware here is what is going on with Pelaton.

Peloton says it may consider cutting jobs and 'resetting' production

https://www.cnn.com/2022/01/20/investing/peloton-halts-production-report/index.html

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

"Peloton CEO John Foley acknowledged Thursday that the company is "considering all options" — including layoffs and production curbs — after a report that the fitness firm has stopped manufacturing its bikes and treadmills sent shares crashing.

His statement did not reference any specific report, but said "rumors that we are halting all production of bikes and Treads" were "false."

Foley's statement came hours after CNBC reported that from February, Peloton plans to pause production of its $1,495 lower-end bike for two months, and stop making Tread machines for six weeks, citing internal documents.

The report also said that production of Peloton's Bike+ — a higher-end bike that costs $2,495 — was halted in December and won't resume until June.

While Foley did say in his statement that the company is "right-sizing" production in response to "seasonal demand curves."

"We are resetting our production levels for sustainable growth," he added.

According to internal documents CNBC says it viewed, company executives are facing a "significant reduction" of demand for Peloton products because of its high prices and increased competition.

CNN Business has not seen the documents.
Foley's statement also alluded to potential job cuts.

"In the past, we've said layoffs would be the absolute last lever we would ever hope to pull," he said. "However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion. And we are still in the process of considering all options as part of our efforts to make our business more flexible."

Peloton (PTON) shares sank nearly 24% Thursday on the CNBC report, its worst day in more than two months.

In his statement, Foley said that "leaks" of "confidential information" have "led to a flurry of speculative articles in the press." He called the information obtained by the media is "incomplete, out of context, and not reflective of Peloton's strategy," and added the company has identified a leaker and is "moving forward with the appropriate legal action."

Peloton has attributed some of its issues to inflation and supply chain challenges. Starting January 31, customers will be required to pay $250 for delivery and setup for Peloton's $1,495 bike — a service that the company previously included in the price. Customers buying Peloton's Tread treadmills will be charged a $350 fee for delivery and installation starting later this month.

"Continued constraints are driving up costs," the company said. That announcement came just months after Peloton cut the price of its original at-home exercise bike drastically to boost sagging sales.

Peloton's stock was battered in 2021 — losing 76% of its value — after skyrocketing in 2020. The company revealed in its most recent earnings report that sales of its stationary bikes and treadmills fell 17%. Those two machines are the company's bread and butter, making up 60% of its business."
Shares are down 32% for the year. Peloton (PTON) reports earnings on February 8."

MY COMMENT

I would NEVER own this company. They are in BIG trouble. AND....the set up and delivery fees are NOT going to go over well. this seems like a company in full on survival mode now.

As I said I do NOT own this company....but if I did.....and had sat on the stock till now....I would sell ALL shares tomorrow. I have noticed lately they are not advertising anymore....at least on any of the TV channels that I watch.

 

Here is how we start the day tomorrow.

Stock market news live updates: Stock futures open lower, Netflix slides after subscribers miss

https://finance.yahoo.com/news/stock-market-news-live-updates-january-20-2022-231302138.html

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

"Stock futures opened lower after another slide in equity markets during the regular trading day, with investors rotating further away from growth and technology stocks that had outperformed early on during the pandemic.

Earlier, the Nasdaq dropped another more than 1%, adding to losses after sinking into a correction earlier this week. The Nasdaq Composite has now fallen nearly 12% from its most recent record high from November.

Shares of Netflix (NFLX) sank in late trading after the company posted subscriber growth that missed estimates for the fourth quarter. Its first-quarter subscriber growth outlook also came up short compared to expectations, with the streaming giant projecting 2.5 million new users for the first quarter of 2022 versus the 6.3 million anticipated, according to Bloomberg data. Shares of Disney (DIS) and Roku (ROKU) fell in sympathy in late trading. Meanwhile, Peloton (PTON) — which had been another darling of the so-called "stay-at-home" trade during the pandemic — added to earlier losses after CNBC reported the company was cutting production of its fitness products due to flagging demand.

"It is these infamous stay-at-home plays ... that had been bid up to valuations that get to the point where they're priced for perfection," Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Yahoo Finance Live on Thursday. "Anything that is released about the companies' investment results or prospects that doesn't meet or exceed very elevated expectations leads to gigantic disappointment in the form of a share price decline."

"This is indicative of companies that, again, have valuations that have been bid up by investors who, on disappointment, decide to sell first and ask questions later, and therefore leave huge carnage in their wake as valuations compress to better reflect prospects under a more normal economic climate," Luschini added.

The drop in many closely watched, highly valued technology stocks — and the broader stock indexes — also came alongside ongoing investors jitters about a potential near-term move on interest rates from the Federal Reserve. The Fed's next policy-setting meeting is set to take place next week, with market participants largely pricing in a first interest-rate hike out from the central bank after the Fed's March meeting. These expectations for higher rates and less liquidity from the Fed this year have also been a key driver of recent equity price action, many strategists noted.

"I think there is a rotation going on towards those areas of the market that have been neglected for a long time — not just months, but years. Areas like financials and energy. Even healthcare, which is an area that had done a bit better during the pandemic, but really isn't seeing any kind of multiples like it did in the past," Jeffrey Kleintop, Charles Schwab chief global investment strategist, told Yahoo Finance Live on Thursday.

"I think those areas of the market have more durability here as we look at an environment where earnings growth is slowing so valuations matter more," he added. "And many of these companies can look to generate earnings growth in this environment of rising interest rates and commodity prices, whereas tech is a bit more challenged as goods demand begins to slow.""

MY COMMENT

This is one of those times when QUALITY matters. The markets are going to separate the men from the boys. Investors that thought they could simply ride every TECH stock based on la-la-land.......pie in the sky........projections of business are in for a rude awakening. In the current environment....we are going to see many companies that are not profitable.....simply disappear.

It will be interesting to see if we start to go through waves of PANIC SELLING.....if this down market continues. This will be a nice little test for all the new investors that have been thinking that they had it all figured out and could do no wrong.

 

I agree with you Emmett on Netflix. We started to subscribe during the pandemic. We are now at the point where we have trouble finding anything to watch. In the meantime they continue to raise their prices. All of these streaming sites are in for a big shake-out.

 

I agree often with Cathie Wood in theory....but not in how she actually invests.

Cathie Wood’s Famous Outperformance Versus the S&P 500 Is Fading

https://finance.yahoo.com/news/cathie-wood-famous-outperformance-versus-134249867.html

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

"With another 4.2% drop on Tuesday, the tech-heavy ARK Innovation ETF is closer to wiping out its famous outperformance versus the S&P 500 Index that helped propel Cathie Wood to Wall Street superstardom.

As rising yields hammer expensive-looking growth companies with shaky profit outlooks, the exchange-traded fund beloved by day traders, ticker ARKK, has already plunged 18.7% this year -- down 51% from February’s peak.

It has now returned just 11 percentage points more than the benchmark U.S. stock gauge since the start of 2020 -- when Wood’s fortunes soared in the pandemic-fueled speculation that helped ARKK trounce just about every fund in America’s now-$7 trillion ETF market.

That year the fund handed investors 153% versus the S&P 500’s 18% return.

Last week Wood, the founder of ARK Investment Management, saw ARKK’s returns since 2020 fall below the Nasdaq 100 Index, as the new year tech wreck disproportionately lashed her favored stocks. Assets managed by ARKK, which launched in 2014, now stand at $12.8 billion versus the $28 billion peak last February.

Given the asset manager’s preference for high growth, speculative stocks, every single U.S.-listed ARK fund is now down in 2022.

Weighted by when inflows occurred, the average investor in five ARK ETFs is sitting on a 27% loss, Bespoke Investment Group wrote in a Tuesday note. The firm monitors a slew of the firm’s funds as a proxy for market risk appetite.

“It would be hard for that sentiment to get any worse at this point,” the team said.

Still, ARK and Wood manage to command remarkable investor loyalty. The latest data showed an inflow of about $193 million into ARKK. And almost all of the more than $15 billion drop in assets managed by the fund has come from underperformance rather than outflows.

Bespoke sees signs all that could be changing.

“Cumulative inflows to the ARK Invest ETF universe are steadily reversing from their peak,” the team wrote. The $24 billion still in ARK’s funds “represents a potential brutal outlook for further liquidity pressure on the space,” the note said.

Amid the turmoil, Wood’s mantra is that ARK invests with a minimum five-year time horizon, and that volatility is to be expected in the industry-disrupting and cutting-edge stocks it targets.

On Wednesday morning, she tweeted about the “enormous” arbitrage opportunity in the disparity of valuations between private and public markets for innovative companies."

MY COMMENT

The data in this article is as of this Tuesday. The numbers have gotten much worse for Wood's funds since than. One problem I have with her style is the number of extremely high risk companies that she owns. Many of them are NOT profitable.....and....many of them will NEVER be profitable. Owners of this fund need to understand that this is an EXTREMELY HIGH RISK fund. I suspect that many of them......do not....understand that.

It will be very interesting to look back in five to ten years and see where she is compared to the SP500.

 

Talk about the POWER of the SP500.....after all the big down days we have seen this year the average is STILL......only....down by 5.95% year to date. I consider that amazing. Over the last 13 market days the SP500 has been down eight days and up five days.

I continue to see this single average as the BEST investment for most people for the long term.