The Long Term Investor

I dont know Emmett.....I was getting pretty tired of winning all the time. It is refreshing to be losing for a change......now that the grownups are back in charge.

 

Ok....back to investing. The markets made a pretty good recovery during the last hour today. They still mostly ended in the red by a little bit....but....the NASDAQ actually got into the green.

I had a small to moderate red day today. Much better than some of the red days lately. I got beat by the SP500 by 0.55%. My winners today were.....Amazon, home Depot and Honeywell.

 

Here is what we went through today in the markets.

US STOCKS-Wall Street whipsaws, S&P closes lower on worries of prolonged inflation

https://finance.yahoo.com/news/us-stocks-wall-street-whipsaws-203744155.html

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

"NEW YORK, May 12 (Reuters) - U.S. stocks ended a whipsaw session slightly lower on Thursday, as investors juggled signs of peaking inflation with fears that it could remain elevated, prompting ever more aggressive tightening from the Federal Reserve.

All three major U.S. stock indexes seesawed and the S&P 500 came within striking distance of confirming it entered a bear market after swooning from its all-time high reached on Jan. 3.

When the dust settled, the S&P and the Dow ended modestly red, but the Nasdaq eked out a modest gain.

The indexes have gyrated wildly in recent sessions, often reversing initial rallies or sell-offs by the closing bell.

"These wild swings of upwards of 2% up or down are extremely rare, and showcase a very fragile investor psyche for that amount of volatility to happen in such a short time frame," said Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina. "Continued concerns over inflation, which looks like it has peaked yet is staying stubbornly high, continues to concern investors, pushing the S&P to the brink of a bear market."

Market leading megacap names, which thrived during the low interest environment of the pandemic, were the biggest drag, with Apple Inc and Microsoft Corp weighing the heaviest.

Recent economic data, most recently the Producer Prices report released before the opening bell, suggested price growth reached its zenith in March.

Even so, the Fed is expected to hike key interest rates by at least 50 basis points at least three times in the coming months, in an effort to toss cold water on demand and rein in soaring prices.

The U.S. Senate on Friday confirmed Jerome Powell for a second term as Fed Chairman.

The move "was widely expected and it opens the door for the Fed to continue to battle the 40-year inflation highs, with many more interest rate hikes likely coming this year," Detrick added.

Geopolitical tensions surrounding Russia's war on Ukraine were dialed up by Finland's announcement that it would apply for NATO membership, with Sweden expected to follow suit. The Kremlin vowed to retaliate.

The conflict, dubbed by Russian President Vladimir Putin as a "special military operation," has fanned the flames of inflation by pressuring global energy and grain supplies.

The Dow Jones Industrial Average fell 103.81 points, or 0.33%, to 31,730.3, the S&P 500 lost 5.1 points, or 0.13%, to 3,930.08 and the Nasdaq Composite added 6.73 points, or 0.06%, to 11,370.96.

Six of the 11 major sectors of the S&P 500 wrapped up the day in positive territory, with healthcare enjoying the largest percentage gain.

Utilities and tech stocks suffered the biggest losses.

Earnings season is nearing the final stretch, and according to the most recent data, 79% of the S&P 500 companies who have posted results delivered better-than-expected earnings, according to Refinitiv.

Analysts now see aggregate first-quarter S&P 500 earnings growth of 11%, up from 6.4% at quarter-end, per Refinitiv.

Shares of luxury accessories company Tapestry Inc jumped 15.5% after expressing confidence in a rebound in Chinese demand once COVID restrictions are lifted.

Beyond Meat Inc dropped 4.2% after the plant-based food producer reported ballooning quarterly losses.

Twitter Inc shed 2.2%. Its chief executive officer announced a hiring freeze and the departure of two of its leaders in view of the takeover effort by Elon Musk.

Declining issues outnumbered advancing ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.15-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week highs and 74 new lows; the Nasdaq Composite recorded 6 new highs and 1,317 new lows.

Volume on U.S. exchanges was 16.17 billion shares, compared with the 13.03 billion average over the last 20 trading days."

MY COMMENT

Interesting that today was a high volume day.

HERE is the KEY in the above:

"Earnings season is nearing the final stretch, and according to the most recent data, 79% of the S&P 500 companies who have posted results delivered better-than-expected earnings..........Analysts now see aggregate first-quarter S&P 500 earnings growth of 11%, up from 6.4% at quarter-end...."

Remember earlier this week how many in the financial media were telling us how earnings have been disappointing? Well here is the REALITY......and it is very good. We are going to end up with......80%....of the SP500 with BETTER THAN EXPECTED earnings. We are also going to end up with EARNINGS GROWTH at about 11%.......versus.......6.4% expected.

Of course.....REALITY.....does not matter anymore. The above is really good earnings data and significant bests of the expectations.

This is partly why we are seeing these very volatile and erratic days with wild and crazy swings. People dont know what or why anything is going on. Half the stuff they read.......in the financial media...... is either unfounded, ignorant opinion or NOT factual. Drama, fear mongering, negativity, etc, etc, etc.....gets clicks.

Welcome to the modern world of investing.

 

I dont see anything in these remarks as helping to restore confidence.

Powell says he can’t guarantee a ‘soft landing’ as the Fed looks to control inflation

https://www.cnbc.com/2022/05/12/pow...ng-as-the-fed-looks-to-control-inflation.html

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

"Key Points

• Fed Chairman Jerome Powell cautioned Thursday that getting inflation under control won’t be easy.
• “Nonetheless, we think there are pathways ... for us to get there,” he said in an interview with Marketplace published Thursday.

Federal Reserve Chairman Jerome Powell warned Thursday that getting inflation under control could cause some economic pain but remains his top priority.

Powell said he couldn’t promise a so-called soft landing for the economy as the Fed raises interest rates to tamp down price increases running near their fastest pace in more than 40 years.

“So a soft landing is, is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now, for a couple of reasons,” the central bank chief said in an interview with Marketplace.

He noted that with a tight labor market pushing up wages, avoiding a recession that often follows aggressive policy tightening will be a challenge.

“So it will be challenging, it won’t be easy. No one here thinks that it will be easy,” he said. “Nonetheless, we think there are pathways ... for us to get there.”

The remarks were published the same day the Senate overwhelmingly confirmed Powell for a second term, a move that came nearly seven months after President Joe Biden first submitted the nomination.

On top of the list for his second-term priorities will be to control price inflation that in April ran at an 8.3% annual rate, just off a more than 40-year high posted in March.

The Fed last week approved a half percentage point interest rate increase that followed a quarter-point hike in March. Markets expect the rate-setting Federal Open Market Committee to hike another half-point in June and to keep increasing benchmark rates through the end of the year.

For his part, Powell said he understands the added pain that higher rates may cause, but said the Fed needs to act aggressively.

“Our goal, of course, is to get inflation back down to 2% without having the economy go into recession, or, to put it this way, with the labor market remaining fairly strong,” he said. “That’s what we’re trying to achieve. I think the one thing we really cannot do is to fail to restore price stability, though. Nothing in the economy works, the economy doesn’t work for anybody without price stability.”

Powell has come under some criticism for the Fed’s delay in raising rates and halting its bond-buying program even as inflation mounted. Moreover, at his post-meeting news conference last week, he made remarks that were interpreted as taking more aggressive steps, like a 75 basis point increase, off the table.

He said in the Marketplace interview that he’s “not sure how much difference it would have made” to act more quickly, adding, “we did the best we could.”

“Now, we see the picture clearly and we’re determined to use our tools to get us back to price stability,” Powell said."

MY COMMENT

These do not sound like the words of someone that is confident. These sound like the words of someone that is hedging their bets and creating sound bites to fall back on when they fail.

The number one thing that is now missing is.......LEADERSHIP. I have seen it in sports, in business, in music, in life......leadership and the culture at the top matters. It is NOT rare to see a new coach or new CEO come in and with the same talent turn a team or a business around. The attitude for success has to come from the top. We are just not seeing that at any level of government right now. The people that should be leading are either distracted, incompetent, or just dont care and are off chasing fantasy issues. THIS.....is why the economy is faltering right now on so many levels. The supply chain, the stock markets, inflation, jobs, world events, crime, schools, etc, etc, etc......it is disaster after disaster. With everything that is going on right now.....or....is not going on right now......combined with ZERO leadership.....it is no surprise that the markets are sinking.

I was laughing with a friend today about the MALAISE that everything seems to be in right now. It reminds me of the old Iran Hostage crisis that hammered Jimmy Carter. Ted Koppel was an unknown when it started but they put him on TV late at night with a little 15 minute update on the hostage crisis.....every night. He would begin every show with......."The Iran Hostage Crisis.....day (fill in the blank)" Every night it went on and on......day 2, day 3, day 48, day 167, day 290, day 344, etc, etc etc......all the way to day 444 when it ended immediately when Ronald Regan came into office and scared the sh*t out of Iran and they immediately backed down. It is all about leadership. That count-down....day after day....all the way from day 1 to day 444..... was a KILLER for Jimmy Carter.....night after night after night.

That is where the markets are right now. Every day is another countdown day to nowhere. I dont see any leader stepping up to even say anything about the markets. Every day people are racking up the losses..... 15%....20%....30% of their hard earned savings......and the people that are supposed to lead are TOTALLY MUTE.

In the current lack of leadership environment.....hang on.....there is potential for the current DISMAL markets to linger for another 2.5 years. I hope not......but I saw it back in that hostage crisis.....all the way up to....."The Iran Hostage crisis......day 444".

 

This is editorial opinion......so anyone ignore if you wish. BUT...

When was the last time you heard anyone at the FED or in high levels of government talk about the markets in a positive way or try to spread some confidence? They ignore it every day.

We are at the start of 70 MILLION people.....the baby boomers.....retiring. About 1/5 of the entire population of the country. Many of them have NO PENSION if they were not government workers and they will be depending on their IRA or 401K. What is going on now is a potential DISASTER for 1/5 of the population. Add in the fact that is is government policy that wiped out the pension system and made people have to invest for their own retirement. Who is showing any concern for those investors.

For that matter......we have probably about 1/2 of ALL ADULTS not under any sort of pension. That means that potentially 1/2 of the entire working population is funding their own retirement through a 401K or an IRA. The vast majority of those people are investing in stocks and funds. Is anyone showing any leadership, care, or interest in those people and how their future is being impacted?

It is total crickets. No one is showing any....."I feel your pain".....toward any of the people that are impacted by the markets right now and the potential for recession.

Our leaders are siting MUTE regarding how what is going on in the economy and the markets is impacting people. they might give a little bit of lip service once in a rare while....but for the most part they are totally distracted and detached.

Keep in mind a recession does not necessarily mean a bad job market or that jobs wilt on the vine. It means that the GDP and the general economy has to endure a mini-collapse. It means that people pull back and become insecure. They lose confidence in the future.

 

OK.....I am done with editorializing......back to money and investing for me.

 

Anyone feel free to express and opinion....especially if it is contrary to mine. There is no need to agree with me. I will not argue opinion.....yours and mine are personal.....and I just dont see that it is productive to argue with people over what they think and feel.

So feel free to comment if you wish.

 

I guess my "editorial RANT" worked.......we are up nicely so far today. At this moment all the averages are up and green. We start fresh for the rest of the year today.

I do not think.....in any way....that the volatility is over. It will probably last all year. It would be nice to get the majority of the big market drop out of the way by the end of this month. As of yesterday I was down by about 24% year to date. I believe that the bottom will be somewhere between DOWN BY 24% to 35% for my account depending on how long the big volatility and selling of the big tech giant names lasts. If I get down by as much as 35% that will ZERO OUT all the gains of 2021 and basically take me back to the end of 2020 in the old market time machine. I am willing to accept that result if that is where we end up. It is just the price someone pays for being long term and enjoying the long term average gains.

 

This little article is very relevant at this moment in time.

Your chief problem and worst enemy as an investor

https://www.evidenceinvestor.com/your-chief-problem-and-worst-enemy-as-an-investor/

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

"One of my favourite investment authors is Benjamin Graham. Widely credited as the father of value investing, Graham was Warren Buffett’s mentor and wrote the classic book, The Intelligent Investor.

One of the central themes of that book is the investor’s capacity for self-harm. “The investor’s chief problem,” Graham wrote, “and even his worst enemy, is likely to be himself.”

Jason Zweig of the Wall Street Journal reminded us this week that Graham’s warning is particularly relevant at times such as these, when global markets are volatile. What Graham teaches us, writes Zweig, is that, as an investor, “your results depend much less on how markets behave than on how you behave.”

“In recent years,” he goes on, “investors have been led to believe that their greatest asset is the ability to trade at will for free. Graham says: No way.

Not your problem

“Your basic advantage as an investor is that you don’t have to trade because everybody else is. When everybody is selling, that’s their problem; it doesn’t have to be yours.

“When the market’s behaviour doesn’t make sense to you, you don’t have to join in. You can marvel at what is going on, but you don’t have to follow the flock…

“If you sell just because other people are selling, you make yourself hostage to the whims of tens of millions of strangers who often go collectively crazy. That’s no way to live, and it’s no way to invest.”

Easier said than done

Of course, keeping your head when all around you seem to be losing theirs isn’t easy. It requires patience, discipline and emotional resilience.

But most of all, as the fourth part in our latest video series How to Invest, commissioned by Wealth Matters, explains, it requires self-knowledge.

So, invest time in getting to know yourself better. Work out the ways in which your own beliefs and personality could actually get in your way, and learn to spot the warning signs. Most importantly, make sure there’s someone you can turn to when you really need them."

MY COMMENT

I guess I should just BOLD this entire little article. In any down market or BEAR market......this advice is.......GOLDEN.

 

So true.......as I sit and watch the daily markets.....while continuing to do nothing.

Wall Street’s most bearish 2022 forecast was bullish. It always was.

https://finance.yahoo.com/news/wall...cast-was-bullish-it-always-was-100048750.html

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

"Heading into 2022, Morgan Stanley stood out on Wall Street thanks to its prediction stocks would fall in the coming year.

In a research note to clients, written on November 14, 2021, the firm predicted the S&P 500 would slide to 4,400 by the end of 2022. At the time, this price target implied a 6% decline for the S&P. It was the most bearish forecast among the prominent Wall Street firms.

The following Friday, I spoke with Julie Hyman and Brian Sozzi on Yahoo Finance Live. Here’s what I said:

“...down 6% in a given year is arguably bullish. Because if you look at the market history, in an average year, the S&P 500 will see a drawdown – a max drawdown – of about 14%. And that's even in bull markets. So, if we have a bull market where we have a year where the market only goes down 6% from the top to the bottom, that's actually an incredibly positive thing to be saying...”

Markets have a long history of short-term bouts of volatility. So, for those well-versed in market history, a 6% decline always looked relatively benign.

This year, I think most investors would be thrilled to be down only 6%. The S&P peaked at 4,818.62 on January 4, then tumbled 20% as low as 3,858.87 on Thursday. The S&P will have to climb 12% from Thursday’s close to reach Morgan Stanley’s 4,400 year end target.

To be fair, most forecasters warned that 2022 was likely to be bumpier than 2021. Based on the volume of revised forecasts in recent weeks, it’s clear almost no one saw this year’s sell-off coming.

Indeed, Goldman Sachs, JPMorgan, UBS, RBC, Barclays, Bank of America, Credit Suisse, and Jefferies all slashed their forecasts amid the market rout.

The point of all this is not to say, “I told you so.” Rather, it’s a reminder that no one should be surprised to see double-digit losses in the short run in their equity portfolios.

Accepting that the market can be volatile is what investing is all about. It’s the price investors pay for long-term riches. Market history can be very helpful in setting expectations. So, read up. You’re less likely to make a financial mistake if you understand how bad things can get in the short term."

MY COMMENT

More simple yet so true commentary. Yes.....what we are going through right now is the price an investor pays for the long term riches. Is anyone surprised that NONE of the big trading houses or banks predicted the current short term market drop? Even with all their quants, resources, economists, massive AI and computer power......no one can predict the short term markets. By extension that means.......no one can market time.