The Long Term Investor

Sorry house hunters.....I am not trying to make you feel bad.

Mortgage rate trap is making the housing market worse

https://finance.yahoo.com/news/mortgage-rate-trap-housing-market-203108693.html?guccounter=1

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

"One big factor that helped numerous homeowners save money is ultimately hurting homebuyers. Call it the interest rate trap.

Years of historically low rates, especially in the last two years, have helped millions of homeowners refinance into mortgages with rates between 2% and 4%, lowering their monthly payment by hundreds of dollars.

Now as mortgage rates near 5%, these same homeowners are thinking twice when it comes to trading up, adding to the inventory shortage that is creating an affordability crisis for buyers.

“Existing homeowners have a disincentive to sell because every dollar borrowed costs more,” Mark Fleming, chief economist at First American Financial Corporation, told Yahoo Money. “The financially rational decision is not to sell.”

This week, the mortgage rate on the 30-year fixed mortgage hit 4.72%, the highest level since December 2018, according to Freddie Mac.

A year ago, that rate was at 3.13%. It reached an all-time low of 2.65% in January of last year. During that time, millions of homeowners jumped on the chance to snag a historically low rate.

Now, only 14% of homeowners with a mortgage have a rate of 4.75% or higher — where Freddie’s Mac measure is roughly now. They are also the only pool of homeowners who could sell their house now and buy another at a rate that is similar to what they have — if all the transactions fall in place before rates rise again, an iffy feat given that rates have moved up at the three-month fastest clip since May 1994, per Freddie Mac.

Otherwise, the remaining 86% of homeowners are sitting tight with a mortgage rate of 4.625% or lower.

“There is greater disincentive to move and replace their current mortgagee that likely has a lower fixed rate, lowering housing turnover,” according to a BofA Global Research note.


86% of homeowners are sitting tight with a mortgage rate of 4.625% or lower. (Credit: Black Knight)
How big is the disincentive?

Take a homeowner with a $100,000 mortgage at 3%. That homeowner pays $3,000 a year in interest payments on a 30-year fixed rate mortgage, Fleming said. If that same homeowner sells their existing home and purchases another home for $100,000 at 4%, the homeowner would pay $4,500 a year — that’s $1,500 more, or $125 more per month.

"So why bring my home to market to sell and become a buyer right away when it will cost more per month?" Fleming said.

And that’s what happening — would-be sellers aren’t selling.

At the end of February, the housing inventory for existing homes totaled 870,000 units, down 15.5% from a year ago when there were 1.03 million units, according to the National Association of Realtors (NAR). Existing homes make up 90% of total home sales.

The result?

"I think there is no question that the low inventory of homes for sale is pushing prices up – probably the primary reason,” David Berson, chief economist and senior vice president at Nationwide Mutual, told Yahoo Money.

The S&P CoreLogic Case-Shiller national home price index posted a 19.2% annual gain in January, up from 18.9% in December.

"While the re-acceleration of home price gains may be concerning, and likely discouraging for first-time and younger buyers, it is nevertheless unsurprising considering the dire inventory of for-sale homes, which continues to decline and continually record new lows," Selma Hepp, deputy chief economist at CoreLogic, said in a statement.

While a seller would get a good price for their home, buying another means facing rising mortgage rates, higher prices on the trade-up home, and an ultra competitive market due to low inventory — a vicious cycle that continues to dissuade homeowners from selling.

“It will slow both demand and supply," Berson said.

There’s another factor at play, too: Inflation, especially as housing costs — both rent and for-sale prices — skyrocket.

Housing — mortgage or rent — makes up a third of most household budgets. Even with maintenance costs and homeowners insurance premium increases, homeownership is still cheaper — because they make up just a quarter of housing-related expenses, according to Fleming. The rest is a fixed mortgage payment.

“Rent is going up faster than inflation in certain areas,” Fleming said. “The best hedge against inflation is homeownership because your housing cost stays the same.”"

MY COMMENT

A BAD triple WHAMMY for house hunters. Mortgage rates are going up and increasing the payments. Rising rates are decreasing housing supply. AND.....home prices are still rising.

Reminds me of some of the horrible times in the past that we bought and sold a house.

 

HERE....is what went on in the markets today....not that it matters since the week is in the bag and over with.

Stock market news live updates: Stocks end choppy session mixed with Fed in focus

https://finance.yahoo.com/news/stock-market-news-live-updates-april-8-2022-222503347.html

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

"U.S. stocks were mixed Friday to cap a choppy trading session as investors continued to contemplate the next policy moves by the Federal Reserve.

The S&P 500 closed down roughly 0.3% after attempting a comeback to end a three-week winning streak, while the Dow shook off earlier losses to climb 140 points, or 0.4%. The Nasdaq Composite shed 1.3% after underperformance in tech stocks held the index firmly in the red the entire session.

Fresh commentary from Fed officials remained in focus, as another set of speakers offered a mixed set of commentary on the policy path forward for the central bank. St. Louis Fed President James Bullard said Thursday that he wanted the Fed to get to between 3% and 3.25% on the Fed funds rate in the second half of this year, implying more aggressive, front-loaded interest rate hikes in the near-term. Bullard was the only dissenter in the Fed's March meeting, calling for a larger 50 basis point interest rate hike versus the 25 basis point hike that ultimately occurred.

While Bullard has now been a longer-term hawk seeking greater action from the Fed to rein in inflation, earlier remarks this week suggested other members of the central bank were also warming to the idea of tightening policy. Fed Governor Lael Brainard said that the Federal Open Market Committee (FOMC) was "prepared to take stronger action," should inflation readings remain elevated and warrant such moves. And in the Fed's meeting minutes released Wednesday afternoon, the central bank revealed that "many participants ... would have preferred a 50 basis point increase" in rates, and also suggested the Fed was gearing up to soon announce the start of its balance-sheet runoff process.

However, other Fed officials offered a more measured approach to raising rates. In remarks Thursday, Atlanta Fed President Raphael Bostic said it would be "appropriate" to move the benchmark interest rate "closer to a neutral position," suggesting a somewhat less hasty series of interest rate hikes. Meanwhile, Chicago Fed President Charles Evans suggested the Fed would be able to "get to neutral, look around, and find that we're not necessarily that far from where we need to go."

Taken together, the confluence of commentary at least temporarily helped stocks pause their latest bout of volatility from earlier this week, and kept Treasury yields steadier after a steep march higher. The benchmark 10-year yield held around 2.6% for its highest level since 2019.

"The market actually had to digest a lot of information — a lot of hawkish information from the Fed over the last couple of days. We had been in a sell-off mode. And I think [Thursday] we finally got a chance to take a breather and realize that the equity markets especially have some actual positive things that are going on," Kevin Nicholson, chief investment officer of global fixed income at RiverFront Investment Group, told Yahoo Finance Live on Thursday. "We still expect the earnings season to be better than expectations ... We also think that you have support with a strong labor market. "The economy is in great shape from that perspective."

"We expect that equity markets will rebound," he added. "And we actually are looking for them to go back up toward their highs of 4,800 over the few months, especially as they get more clarity from the Fed. As we all know, equity markets do not like uncertainty."

2:13 p.m. ET: Tesla, Block, Blockstream reportedly working on mining bitcoin with solar power in Texas

Tesla, Block — the company formerly known as "Square" — and blockchain company Blockstream are reportedly working together on a plan to mine bitcoin in Texas with solar power, according to CNBC on Friday.

Based on the report, the renewable energy-only project would use solar and storage energy from Tesla, and would include publicly accessible metrics of power output and bitcoin mined.

12:32 p.m. ET: Margins are 'going to be the key differentiator for stocks'

First-quarter corporate earnings season is set to kick off in earnest next week with a host of major financial institutions including JPMorgan, Morgan Stanley and Goldman Sachs reporting results. According to a number of analysts, companies' profit margins will be the key factor to watch for investors looking to appraise which firms are effectively navigating in the face of inflation.

“I think it’s really going to be really the key to watch for, corporate earnings. To date actually, on a year-to-date basis, we’ve seen upward analyst revisions meaningfully throughout 2022," Erin Browne, PIMCO portfolio manager, told Yahoo Finance Live on Friday. "And so the market really isn't yet focused on a slowdown or any translation of the volatility that we’re seeing in some of the economic data, particularly the inflation data, translate over into earnings expectations."

"So I think that’s going to be the key to watch. And really what the market’s going to be focused on is margins: How are corporates being able to manage the increased inflation and costs input inflation that they’re seeing coming through," she added. "And that is going to be the key differentiator for stocks.”

MY COMMENT

The usual suspects.......the FED again. They continue to be all over the place.....as they rush to the nearest microphone. What a joke. WE NEED CERTAINTY........not a bunch of ego maniacs spouting their personal opinions. Please.....just shut up. Or better yet, put a 1-2 year plan in place to raise rates on some schedule and let everyone know what it is and that you will stick with it. Than put a GAG on all of these people....please.

EARNINGS........yea. We need a new fearmongering topic and a distraction from the FED.

 

TGIF........TGIF.

 

Zukodany.....I think those "ashcans" are in the auction that is going on this weekend.

 

Sounds like a nightmare TireSmoke. We are seeing exactly the same thing in my area. Those of us that already own a house are very lucky.

I hope you kept your house money separate from your investing money......since it was short term money.

 

Yeah......and there is no better use than for a house.......especially at your young age.....and being a first time home buyer.

 

HERE is what we are looking at this week.....with emphasis on earnings beginning.

Bank earnings, CPI inflation, retail sales: What to know this holiday-shortened week

https://finance.yahoo.com/news/bank...ow-this-holiday-shortened-week-180312561.html

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

"A flurry of big bank earnings and fresh inflation data out of Washington are expected to keep investors busy this holiday-shortened trading week. Market participants will also tune in Wednesday for a key economic report on March retail sales activity.

Despite a four-day trading session, with Wall Street closed for Good Friday, a pivotal week is underway for investors as mega-banks including JPMorgan Chase, (JPM), Goldman Sachs (GS), and Citigroup (C) get the ball rolling on Q1 earnings season. On the economic data front, markets will get the latest gauge of U.S. inflation with Tuesday’s closely-watched Consumer Price Index (CPI) and the Producer Price Index (PPI) set for publication Wednesday.

The Bureau of Labor Statistics’ (BLS) March read on CPI is expected to come in red hot again, with inflation unlikely to show any signs of abating as supply chain snarls continue to flare up prices, particularly with Russia’s war in Ukraine weighs on flows of global energy and commodities.

Consensus economists anticipate headline CPI will again accelerate to show an 8.4% year-over-year increase, surging higher from February’s 7.9% rise, according to Bloomberg consensus data. The figure would mark another decades-high rate of inflation, with the index, even excluding volatile food and energy prices, set to climb as much as 6.6%, up from February’s 6.4% increase.

On a month-over-month basis, economists are looking for a 0.5% rise — a print that would mark 22 consecutive monthly advances on consumer prices across the U.S.

“The upcoming Consumer Price Index for March will not be pretty,” Bankrate chief financial analyst Greg McBride said in a note. “Inflation has continued to accelerate in recent months and with the higher gasoline and food prices stemming from the war in Ukraine, the worst is likely still to come.”

The newest CPI print is due out as markets grapple with the likelihood Federal Reserve officials will act more aggressively to rein in inflation after a hawkish readout of minutes last week from the central bank’s March meeting suggested "many" policymakers favored a double-bump interest rate hike to combat surging price levels. Conversations detailed in the March 15-16 Fed minutes indicated the bank will soon begin to unwind its $9 trillion balance sheet and signaled members of the Federal Open Market Committee (FOMC) “would have preferred a 50 basis point increase" in benchmark interest rates last month when the Fed raised rates for the first time since 2018.

The minutes also echo recent public remarks from Fed leaders, including commentary on Thursday from St. Louis Fed President James Bullard who said he wanted the central bank to get to between 3% and 3.25% on the Fed funds rate in the second half of this year, implying more aggressive, front-loaded interest rate hikes in the near-term. Fed Governor Lael Brainard also said last week that the FOMC was "prepared to take stronger action," should inflation readings remain elevated and warrant such moves.

“With prices increasing everywhere you look and both consumers and businesses bracing for more, it is time for the Federal Reserve to take the gloves off,” McBride said. "The Fed is now much more inclined to boost interest rates by one-half percentage point at their meeting in May, and very possibly beyond.”

Inflation numbers are underway this week not only on the consumer side but from the perspective of costs to producers supplying goods. The Producer Price Index (PPI) set for release Wednesday is expected to show another elevated figure, with Bloomberg economists expecting a reading of 10.6% year-over-year, up from the already higher-than-expected 10.0% in the prior month. Last month, economists at Bank of America said the headline number was “boosted by blistering strength in commodities” as energy and food prices jolted higher.

“Underlying inflation pressures likely remain elevated given constrained supply chains and tightening labor markets,” BofA said in the note from last month.

Meanwhile on Wednesday, investors will be watching for March retail sales numbers. Consensus economists are expecting retail sales excluding autos, released by the U.S. Census Bureau, increased slightly last month by 0.6%, compared to February’s advance of 0.3%, according to Bloomberg data. The number, however, remains low compared to a rise of 1.0% in January. Bank of America economists attributed a window in retail sales activity to slower auto purchases but expect rising gas prices will offset weakness in auto related spending. According to BofA data, gas spending surged by 6.5% month-over-month in March as retail gas prices reached historic highs.

Bank earnings

On the earnings front, investors will see a pick-up in releases of quarterly results with some of the largest U.S. banks commencing a new corporate reporting season. JPMorgan is the first set to unveil its Q1 numbers on Wednesday, with a lineup of other industry heavyweights following suit before the bell on Thursday: Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), and Citigroup (C).

Banks stand to benefit from the backdrop of monetary tightening by the Fed, with higher interest rates poised to increase banks’ net interest income (the bank’s earnings on its lending activities and interest it pays to depositors) and net interest margins (calculated by dividing net interest income by the average income earned from interest-producing assets.)

However, analysts are expecting a lackluster year for the industry’s earnings despite the profitability boost, specifically compared to the profit boom last year. In 2021, bank balance sheets benefited significantly from releasing COVID-era credit loss allowances, reserves financial institutions accumulated at the start of the pandemic to absorb the potential shock of borrowers being unable to pay their debts. This year, that financial boost will be absent from results. Bank profits were also lifted by exceptionally strong dealmaking and trading in 2021, but investment banking revenues stalled after the Russian invasion of Ukraine in late February.

Still, strategists anticipate a solid earnings season overall. According to data from FactSet’s John Butters, analysts have slightly lowered bottom-up EPS estimates on S&P 500 companies in aggregate for the first quarter (a 0.7% decrease from $52.21 to $51.83), from year-end 2021 through March 31. However, they lifted EPS forecasts for the second quarter by 1.6% from $55.16% to $56.07, by 2.4% from $57.82 to $59.23 for the third quarter, and by 3.9% from $58.31 to $60.59 for the fourth quarter. Given the increases in estimates for the second, third, and fourth quarters, analysts also increased EPS estimates for all of 2022, lifting projections by 2.0% for the year from $223.43 to $227.80.


While analysts were decreasing EPS estimates in aggregate for the first quarter, they were also increasing EPS estimates in aggregate for the next three quarters.
“In this environment, with valuation expansion potentially tough to come by due to rising interest rates and high inflation, earnings take on more importance,” said LPL Financial equity strategist Jeff Buchbinder in a recent note. “The good news is corporate America is in excellent shape — earnings estimates are higher in 2022 now than they were at the start of the year, which is no small feat.”

Economic calendar

Monday: No notable reports scheduled for release

Tuesday: NFIB Small Business Optimism, March (95.0 expected, 95.7 during prior month), Consumer Price Index month-over-month, March (1.2% expected, 0.8% during prior month), CPI excluding food and energy month-over-month, March (0.5% expected, 0.5% during prior month), CPI year-over-year, March (8.4% expected, 7.9% during prior month), CPI excluding food and energy year-over-year, March (6.6% expected, 6.4% during prior month), CPI Index NSA, March (287.410 expected, 283.716 during prior month), CPI Core Index SA, March (289.188 expected, 287.878 during prior month), Real Average Hourly Earnings, year-over-year, March (-2.6% prior, revised to -2.5%), Real Average Weekly Earnings, year-over-year, March (-2.3% prior, revised to -2.2%), Monthly Budget Statement (-185.5 billion expected, -$216.6 billion prior)

Wednesday: MBA Mortgage Applications, week ended April 8 (-6.3% during prior week), PPI final demand, month-over-month, March (1.1% expected, 0.8% during prior month), PPI excluding food and energy, month-over-month, March (0.5% expected, 0.2% during prior month), PPI excluding food, energy, and trade, month-over-month, March (0.5% expected, 0.2% during prior month), PPI final demand, year-over-year, March (10.6% expected, 10.0% during prior month), PPI excluding food and energy, year-over-year, March (8.4% expected, 8.4% during prior month), PPI excluding food, energy, and trade, year-over-year, March (6.6% expected, 6.6% during prior month), Net Long-Term TIC Outflows, January ($114.5 billion during prior month),

Thursday: Retail Sales Advance, month-over-month, March (0.6% expected, 0.3% during prior month), Retail Sales excluding autos, month-over-month, March (1.0% expected, 0.2% during prior month), Retail Sales excluding autos and gas, month-over-month, March (0.0% expected, -0.4% during prior month), Retail Sales Control Group, March (-0.1% expected, -1.2% during prior month), Import Price Index, month-over-month, March (2.3% expected, 1.4% during prior month), Import Price Index excluding petroleum, month-over-month, March (1.0% expected, 0.7% during prior month), Import Price Index, year-over-year, March (11.9% expected, 10.9% during prior month), Export Price Index, month-over-month, March (2.2% expected, 3.0% during prior month), Export Price Index, year-over-year, March (16.6% during prior month), Initial jobless claims, week ended April 9 (173,000 expected, 166,000 during prior week), Continuing claims, week ended April 2 (1.500 million expected, 1.523 during prior week), Business Inventories, February (1.3% expected, 1.1% prior), NAHB Housing Market Index, March (81 expected, 82 in February), University of Michigan Consumer Sentiment, April preliminary (59.0 expected, 59.4 during prior month), U. of Mich. Current Conditions, April preliminary (67.0 expected, 67.2 during prior month), U. of Mich. Expectations, April preliminary (54.0 expected, 54.3 during prior month), U. of Mich. 1 Year Inflation, April preliminary (5.6% expected, 5.4% during prior month), U. of Mich. 5-10 year Inflation, April preliminary (3.0% during prior month)

Friday: Empire Manufacturing, April (1.0 expected, -11.8 during prior month), Industrial Production, month-over-month, March (0.4% expected, 0.5% during prior month), Capacity Utilization, March (77.8% expected, 77.6% during prior month), Manufacturing (SIC) Production, March (0.5% expected, 1.2% during prior month), Net Long-Term TIC Outflows, February ($58.8 billion during prior month), Total Net TIC Outflows, February (-$294.2 billion during prior month)

Earnings calendar

Monday

No notable reports scheduled for release

Tuesday

Before market open: Albertsons (ACI) and CarMax (KMX)

After market close: No notable reports scheduled for release

Wednesday

Before market open: JPMorgan (JPM) at 7:00 a.m. ET, Fastenal (FAST) at 7:00 a.m. ET, Bed, Bath & Beyond (BBBY), BlackRock (BLK), Delta Air Lines (DAL), First Republic Bank (FRC)

After market close: Rent the Runway (RENT)

Thursday

Before market open: PNC Financial (PNC) at 6:45a.m. ET, Wells Fargo (WFC) at 7:00 a.m. ET, Goldman Sachs (GS) at 7:30 a.m. ET, Morgan Stanley (MS) at 7:30 a.m. ET, Ally Financial (ALLY) at 7:30 a.m. ET, Citigroup (C) at 8:00 a.m. ET, State Street (STT) at 8:30 a.m. ET, Rite Aid (RAD)"

MY COMMENT

It tells you something when this article spends the entire first half or more of the article talking about the FED and inflation. The financial media is just giving lip service to earnings. They would much rather talk about the SCARY FED and inflation. Much more DRAMA in these topics and much more potential for clicks.

The ACTUAL news this week is the start of earnings. The banks dont mean much to the rest of the markets. There are hundreds of them that report and they dont really correlate to any other earnings.

At least it will be a good thing to see some earnings. It will be a chance to change the daily topic for short time. As we get further and further into the re-opening it will be interesting to see if earnings are starting to fade any. I think earnings will be strong this quarter due to the massively spending consumers.

 

Yeah TireSmoke.......not much you can do if you are committed to the stocks that you hold for the longer term.

It appears that this week is going to be another.....typical.....week. Unfortunately "typical" means that the direction this week is "probably" negative.

At least there is some interesting stuff in the news today. I am referring to Elon Musk deciding to NOT join the Twitter board. Probably a smart move. He avoids being a Fiduciary. He avoids all the time and effort it will take to be an active board member. He avoids all the frustration of dealing with the inherent company culture and crazy employees. AND.......the big one.....he avoids ALL restrictions and limits on the number of shares he can buy.

 

As usual.....I like this little article.

Always Buy High Uncertainty. Certainty In the Stock Market Is Very Expensive

https://www.realclearmarkets.com/ar...he_stock_market_is_very_expensive_826314.html

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

"When—and how—will Russia’s horrid Ukraine invasion end? How nosebleed high will gas prices climb? Are food prices next? And food shortages? Will China’s renewed lockdowns further gum up already sticky supply chains? What about interest rates ratcheting from Fed tightening? Or America’s wacky midterm election campaigning? Early 2022 ushered in seemingly ubiquitous uncertainty—which stocks famously hate. But don’t despair. The first-quarter fog—now widely pre-priced into stocks—will lift. Don’t fear today’s uncertainty—embrace it. Buy before the clearing haze sends stocks soaring.

The old adage that stocks hate uncertainty is true—but only partially. Stocks hate high and rising uncertainty. High but falling uncertainty, however, is the absolutely best stock market fuel anyone could ever ask for. And that is dead ahead now.

Take Russia’s tragic Ukrainian invasion and the West’s response. It amplified early choppiness but doesn’t change my January 13th forecast here of a volatile first half followed by a big second-half relief rally. No, I didn’t forecast the war nor envision the straight slide down to February 24th. Yes, the path of war ahead remains unknown. But clarity is emerging regarding coldhearted markets’ chief concern: energy. Hence oil is nearly -25% off March’s peak and European natural gas has more than halved.

Markets have priced America’s and the UK’s mostly symbolic, economically meager Russian oil bans, too. There is some clarity there! They see China, India and others snapping up cheap Russian crude at big discounts—cut rate to countries ready to trade with pariahs like Putin’s Plutogarchs, but that supply isn’t off the market. More clarity! They know Putin isn’t stanching energy shipments to punish foes—no surprise given those revenues comprise over a third of Russia’s budget. You guessed it—even more clarity.

Yes, some energy uncertainty remains. Talk lingers of far more significant bans in Russia-reliant Europe. But Germany and others’ opposition to oil and gas embargos offers important information, letting markets more easily pre-price probability of the “big ban theory.” With current talk solely coal focused and the can kicked down the road to August—and with coal powering only a tenth of Europe’s energy—that probability looks low. Regardless, every step forward reduces uncertainty, draining far-flung, worst-case scare stories’ power. Soon fuel prices will either be lower—or markets will have acclimated to them being high … and moved on.

Other uncertainty expiration dates approach, too. I told you January 28th, Fed rate hikes wouldn’t boost long rates nearly as much as folks widely fear. With one hike already done, more seemingly close and “quantitative tightening”—the Fed reducing its huge bond portfolio—possibly starting in May, we should soon see the effects. Either way, whether I’m right or wrong, or you are, uncertainty will fall soon in a world where stocks look beyond the news to the future for pricing.

China’s COVID lockdowns? They are unpredictable. But their economic impact is relatively predictable now. Markets learned fast in 2020 and now know well that temporary shutdowns’ sharp slowdowns reverse fast when restrictions lift.

Another huge uncertainty domino set to fall: midterms. Shrill campaign rhetoric always spikes unease early in midterm years, weighing on stocks. Will congressional bozos really go after oil profits to punish them for high gas prices? Will Billionaires be banished in America as if Putin’s puppy dogs? Will Kyrsten Sinema prevail on Dancing with the Stars? Eek!

This year, campaign pledges will be ultra-extreme and the shrieking ultra-shrill. Why? Both parties used the decennial Congressional redistricting to solidify existing advantages, meaning many incumbents’ biggest challenges will come from within. That spurs a “Race for the Base,” with Republicans and Democrats alike eschewing moderation for dyed-in-the-wool party polemics, posturing, and trotting forth proposed legislation that has as much chance of prevailing as I would on Dancing with the Stars (LOL).

But the long-awaited redistricting results also kicked off clarity’s climb, narrowing the focus to a small number of contested races. Now markets can pre-price probable outcomes. The president’s party almost always loses seats in midterms—so President Biden’s Democrats likely lose one or perhaps both Congressional chambers creating partisan hardcore gridlock!

Politically for stocks, hard and fast gridlock is the ultimate uncertainty remedy. It renders governments incapable of passing any big controversial legislation. Big bills often create winners and losers, spooking investors because—as behavioral psychology documents—people hate risk of losses much more than they love potential for gains. Gridlocked governments also let businesses better plan for the future. Knowing the rules are unlikely to change, they grow more comfortable deploying capital to spur future growth. Investors do, too. Stocks love it.

Political biases blind most to midterms’ gridlock market magic. But as I wrote in January, the reality should dawn fully on investors sometime in 2022’s back half, with plunging legislative uncertainty turbocharging stocks. The fourth quarter of mid-term election years has been positive 88% of all S&P 500 instances. Well-known, pre-priced headwinds—inflation, Ukraine, COVID shutdowns—lack sufficient surprise power to prevent it.

Global stocks’ rebound since early March may already reflect shrinking uncertainty. But more short-term, wild wiggles could remain. Don’t let them sway you. Trying to time markets’ short-term swings is folly. In my 50th year managing money professionally I’ve never seen anyone do it consistently. You don’t need to. Through this Q1, the S&P 500 returned more than 9% annualized over the past 20 years—a 487% total return that includes three stomach-churning bear markets, many corrections and scores of mini-dips. Preternatural timing isn’t a prerequisite for meeting your financial goals. But selling low and missing out on stocks’ big rebounds is a prime and evil way to fall short of them. Maybe this is a V-shaped correction and we saw the bottom a month ago. Maybe it is a W-shaped one with the low still ahead. Maybe not. About a third of all corrections in history have been roughly W-shaped. But, either way, corrections lead to higher prices looking a year out.

Relief is coming. Meanwhile, remember the age-old saying: “If you want clarity, the stock market is a very expensive place to get it.” This one, too: “Sell on the fear, buy on the news,” because by then markets have priced in the worry—just look at global markets being nicely higher now than the day Russia invaded Ukraine. Once certainty or even increased clarity arrives, stocks are routinely far higher than when frustratingly foggy futures reigned. That makes those who buy during the haziness doubly happy when it clears. Hazy makes happy."

MY COMMENT

Yes the markets LOVE clarity and certainty. Some times the media and others refuse to accept clarity......or....try to ramp up the speculation and drama. If you think about it......the majority of events and news items right now have been known for a long time. In my opinion the amount of volatility and negativity we are seeing now is way out of line with what is going on in reality.

One reason that long term investing works is that over the longer term clarity is obvious.

 

Classic herd behavior.

Suddenly everyone is obsessed about a recession: Morning Brief

https://finance.yahoo.com/news/sudd...bout-a-recession-morning-brief-090825278.html

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

"By sometime next year, the U.S. economy may be limping around like Tiger Woods this past weekend at the Masters (sorry Tiger, I had to go there — I was rooting for you to win though).

And just like watching the legend's shaky performance at the Masters, it's almost hard to believe we are even sitting here pontificating on a recession.

The unemployment rate is near record low levels. Sub-30 year olds have never felt more emboldened to change jobs five times in under three years to boost their LinkedIn profile (and yes, skills in some cases) and send out the proverbial "personal news" tweet to their 100 followers.

Corporate profit margins remain near record highs as employers suck every last ounce of productivity from tired, overworked employees just wondering if their package of chicken thighs for dinner will cost them 20% more next week (inflation has increased the cost of my chicken breasts — damn shame).

Yours truly was turned away by four shops on Saturday for a paint job on his classic General Motors car. The common theme: "Bro, we just have too much business at the moment to pull bumpers off your old ass car... sorry, but not sorry."

I only wanted a white paint job!!

Insane to be thinking about a looming recession given all of these examples? The last recession lasted just two months in 2020 from February to April, due to the COVID-19 pandemic. The economy has recovered so much since then.

Yet, here we are with recession worries beginning to pick up in financial circles (but oddly, not the stock market).

A few recent hot takes on this "growth slowdown" worth mentioning are below.

Deutsche Bank Chief U.S. economist Matthew Luzzetti in a new note:

"While timing the exact quarters of negative growth is never easy, we see the Fed's tightening beginning to materially slow growth in the second half of 2023. Our baseline forecast has negative quarters for growth in Q4 2023 and Q1 2024, consistent with a recession during that time. The mild recession we anticipate should nonetheless lead to a meaningful rise in unemployment, which peaks above 5% in 2024."

Luzzetti pealed back his call further on Yahoo Finance Live.

Morgan Stanley Chief economist Seth Carpenter on Yahoo Finance Live:

"If you think about what the Fed itself thinks is the long-run sustainable growth rate of the economy, they think that rate of growth is below 2%. And so if you take a growth rate in the economy that's above 5% or 6%, and you're going to try to bring it down to below 2%, that 4-plus percentage point deceleration is just a massive, massive deceleration to happen, even if it happens over the course of two years or so. So I think no two ways about it, the slowing in the economy has to be dramatic."

RBC Capital Markets head of U.S. equity strategy Lori Calvasina on Yahoo Finance Live:

"I will tell you that RBC's economists are not making that [recession] call right now. They think the recession risks have grown, and they're monitoring them very vigilantly, but they actually have changed their forecasts recently and pulled us down to 2 and 1/2% [growth] for this year. And they are not making the recession call for next year yet. I actually pushed my economist the other day, and I said, what if we end up having a recession? What does it look like? Because you're seeing very different market reactions in terms of both multiples and stock prices in different contraction periods economically. And he said, look, I think if we get this, it's going to be something that's more of the milder variety. I think that's really interesting because the discussion hasn't quite gone there yet on the Street. People are kind of focused on yes or no. But I do think that that's probably the next place the conversation is going to go."

Levi's CFO Harmit Singh on Yahoo Finance Presents:

"We’re mining information each day. We’re speaking to economists regularly. The state of the buyer within the U.S. is actually robust. Balance sheets are robust. Unemployment is at an all-time low. Wage progress is going on." Singh added Levi's is not seeing ordering cancellations by retailers, which are usually a telltale sign of slowing economic growth.

As to why this recession chatter has intensified, pick your poison.

Gas prices are above $4 a gallon, hitting consumers hard in the wallet. Inflation for everyday items is rampant. The Federal Reserve is raising interest rates, which is already beginning to hit the U.S. housing market.

I am sure I left out a few things, but that is the current state of play. Whether a recession happens is anyone's guess? But you can best believe the economy has slowed, and with that will likely cause an upheaval in the markets sometime soon. In the meantime, markets will probably limp along like Tiger.

Happy trading!"

MY COMMENT

Much of the recession talk is simply positioning. No one wants to be caught off guard by their customers.....so they make these statements to cover their ass.

In REALITY much of the recession talk stems from the FED. People.....simply.....do NOT trust the FED to be competent. They believe that the potential is there for the FED......as usual......to screw things up and cause a recession by their actions.

 

I cant see the tiger Woods golf club price. I dont see him being a long term iconic figure that justifies these sorts of prices.

Now the comic prices over the weekend at the Heritage auction. They seemed strong to me. BUT....I am not a comic collector. The comic market is very established at this point......and is here to stay.

Zukodany what is your take on the auction prices? Did you see what those ashcans sold for?

 

I was looking at those ashcan prices. One that I saw was in the high $200's. I saw a couple of others that were just below the $50's. As a non-comic collector I thought they might go higher. But it makes sense....they are not actually comics......and are a niche collecting area.

 

TireSmoke mentioned Nvidia earlier. Here is what he was talking about.......in abbreviated form.

Nvidia Stock Is Downgraded. China and Russia Are Headwinds.

https://www.barrons.com/articles/nv...a-russia-51649680796?siteid=yhoof2&yptr=yahoo

"Nvidia shares were falling on Monday after the stock was downgraded by a Baird analyst, who cited concerns over slowing consumer demand exacerbated by the Russian embargo.


Nvidia (ticker: NVDA) stock was down for its fifth consecutive day on Monday, losing 5.4% to $218.61. The stock has lost 19.8% over this five-day period, and 21% this year. This is the stock’s worst five-day stretch since March 16, 2020, when it fell 19.9%, according to Dow Jones Market Data."

 

I was RED today.......nothing in the green. I also got beat down by the SP500 by 1.17%......not that the SP500 did well today either.

At this moment I am down year to date by (-11.50%). I am down from my all time high by (12.50%)