The Long Term Investor

WELL......the good news.....we are done with another week and that much closer to the future. A quick post of the results for the week.

DOW year to date (-13.97%)
DOW for the week (-2.90%)

SP500 year to date (-18.14%)
SP500 for the week (-3.05%)

NASDAQ 100 year to date (-27.48%)
NASDAQ 100 for the week (-4.45%)

NASDAQ year to date (-27.42%)
NASDAQ for the week (-3.82%)

RUSSELL year to date (-21.02%)
RUSSELL for the week (-1.08%)

Not much good about this week. Investors and others are now starting to come to terms with what......"might".....happen in the economy and markets over the next months. BRING IT ON.......and get it over with so we can move on.

 

The last four weeks have been.....BRUTAL....to say the least. Here are the past four weeks of returns for the SP500 and the NASDAQ.....starting with this week and going back four weeks.

SP500

(-3.05%)
(-2.41%)
(-0.21%)
(-3.27%)

NASDAQ

(-3.82%)
(-2.80%)
(-1.25%)
(-3.93%)

TGIF.

 

My little road trip is going just fine. A good time to be out of touch with the markets. We are traveling in a big van and doing nicely. We are about half way done with the.......2000 miles.

Hang in there guys.......this will end.....someday.

 

I strongly agree with this little article.

Inflation 'is inseparably linked to the supply chain,' former Home Depot CEO says

https://finance.yahoo.com/news/infl...ly-chain-former-home-depot-ceo-115149137.html

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

"Inflation appears to be spilling into all parts of the economy, with one primary reason being ongoing supply chain constraints.

"Inflation is inseparably linked to the supply chain," former Home Depot CEO Bob Nardelli told Yahoo Finance Live (video above). "I look at a global view of the container ships around the world and we have well over 550 ships right now floating on the water waiting to get unloaded. We have an equal number of tankers floating on the water ready to get unloaded."

The pandemic created the perfect storm to disrupt supply chains: Port backups, container shortages, and other supply chain nightmares meant that retailers and brands were largely put at the mercy of forces outside their control.

"Supply chain has caught every company off guard here, and I just don't see it getting better," Nardelli said. "I think we're in for a long, rough patch, certainly through the balance of this year until we get stability back in the supply chain."

'Unbelievable' challenges in China

China holds the cards for the global supply chain as a severe COVID-19 lockdown in Shanghai lasting more than two months may be coming to a gradual end.

A fifth of the world’s containerships are stuck in congested ports, according to Windward data, and a quarter of those "stuck ships" are at Chinese ports. Since February, the number of container vessels waiting outside of Chinese ports has risen by 195%.

Additionally, shipping one container from China to the West Coast now costs roughly twice as much as it did a year earlier, research firm Resilinc found, with 344 ships stuck at the Shanghai port — a 34% increase since March.

"If you think about the city they shut down in China, you got 26 million people, fourth-largest port in the world, and we're not moving product in to get manufactured, and we're not moving product out on the supply chain," Nardelli said. "We've got a real challenge here globally in our economy or business. And I've never seen the challenges for a CEO greater than they are today. The broad range of constituents that they have to try and satisfy is unbelievable. Unbelievable to date."

Meanwhile, Home Depot (HD) seems to be weathering these challenges surprisingly well. The home improvement retail giant reported better-than-expected earnings. Sales rose nearly 4% from a year ago to $38.9 billion and were the highest-ever for the first quarter in the company's history, current CEO Ted Decker noted on the earnings call.

Home Depot said Tuesday it expects revenue to rise 3% this year after a strong start. It's the latest sign consumers are absorbing higher prices after retail sales jumped 0.9% last month and were revised higher for March.

The average spending per transaction also grew faster than Home Depot expected due to inflation across several product categories, including core commodities like lumber and building materials.

"We're dealing with inflation every day," Nardelli stressed. "It's not a quarterly thing. It's not a monthly thing. It's every day.""

MY COMMENT

This supply disruption......that no one is doing anything about.......is not going to end soon. This is a KEY reason for the current inflation. This is ALSO one reason why raising interest rates will not do much at all. The current issues are driven by the economic shut down and supply/demand disruption.

 

Got back from my little road trip about an hour ago. It was good. Reminds me of the touring days.

I was talking to some guys at one show about touring. We were comparing notes on how most people think it is so cool and romantic, etc, etc, etc.. We all knew the reality......it is a GRIND. Some people can handle it and many people can not. It usually takes about 2 weeks to see if someone is able to handle it or not.

 

I never looked at the markets today till I got home. I was pleasantly surprised to see that I was nicely in the green for the day. A BONUS was my nice beat on the SP500 by 0.58%.

Of course I am still in BEAR MARKET range for the year with a loss of.......(-25%).....year to date.

I am with you Zukodany.....I dont know why people FREAK OUT and sell or react to short term news and opinion. BUT.....that is always the way of the market.

UNFORTUNATELY......I still see another........15-25%.....DOWNSIDE to the markets right now. The only way the FED is going to make any impact on inflation is by CRASHING the economy. I have ZERO confidence in the FED being able to engineer a soft landing........so.......that is why I am seeing the downside as another 15-25%.

SO.....we will get to go through a little modern STAGFLATION before things get better..........WHATEVER.

 

Here is the earnings for NVIDIA that Zukodany referenced above. One of my 10 core holdings.

Nvidia stock falls on light guidance, CFO says company will slow hiring

https://www.cnbc.com/2022/05/25/nvidia-nvda-earnings-q1-2023.html

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

"Key Points

• Nvidia reported fiscal first-quarter earnings on Wednesday.
• The stock dropped in extended trading after the chipmaker gave a light forecast for the current quarter.
• Nvidia will slow down its hiring pace and control expenses as the company deals with a challenging macroeconomic environment, its CFO Colette Kress said.

Nvidia will slow down its hiring pace and control expenses as the company deals with a challenging macroeconomic environment, its CFO Colette Kress said after the company reported fiscal first-quarter earnings on Wednesday.

Nvidia beat analyst expectations for sales and earnings, but the stock dropped more than 10% in extended trading at one point after the chipmaker gave a light forecast for the current quarter.

Here’s how Nvidia did versus Refinitiv consensus estimates for the quarter ending May 1:

• EPS: $1.36, adjusted, versus $1.29 expected
• Revenue: $8.29 billion versus $8.11 billion expected

Nvidia said revenue for the current quarter would be about $8.1 billion, under analyst expectations of $8.54 billion. Nvidia stock is down over 43% so far in 2022 as investors shun fast-growing stocks in favor of safer bets during a period of high inflation and macroeconomic uncertainty.

Nvidia CEO Jensen Huang said that the company was facing a “challenging macro environment” in a statement. The company’s operating expenses increased 35% year-over-year to $1.6 billion on a non-GAAP basis.

Nvidia said its revenue in the current quarter would be $500 million lower than it would have been if not for the Russian war in Ukraine and Covid lockdowns in China.

But Nvidia continues to increase its revenues strongly and is still seeing robust demand for its graphics processors, which are are widely used for advanced gaming and artificial intelligence in the cloud. Its total sales were up 46% year-over-year, and its core businesses of data center and gaming sales both grew during the quarter.

Nvidia’s data center business, which sells chips for cloud computing companies and enterprises, grew 83% annually to $3.75 billion, surpassing the company’s core gaming business, which sells graphics cards for playing advanced 3D games, which grew 31% annually to $3.62 billion.

Nvidia said that the growth in gaming was driven by graphics cards for laptops and chips for game consoles. Nvidia makes the chip at the heart of the Nintendo Switch.

The company said that inventory of its graphics chips for gaming, which had been difficult to find at retail prices for the past year, had “normalized,” suggesting that the shortage is starting to abate. Nvidia said it expected gaming revenue to decline sequentially “in the teens” in the current quarter.

The company’s results in its smaller lines of business were mixed. Professional visualisation for workstations grew 67% annually to $622 million, but the company’s automotive business was down 10% on a year-over-year basis to $138 million.

Earlier this month, Nvidia announced that it had reached a settlement with the SEC over disclosures in 2017 about how cryptocurrency mining drove the company’s growth. Nvidia said that its cryptocurrency-specific products, CMP, drove a 52% decline in other revenue, as revenue was “nominal” during the quarter.

Nvidia said its board has authorized an additional $15 billion in share buybacks through the end of next year. It spent $2.1 billion on share buybacks and dividends in the first quarter.

Earlier this year, Nvidia terminated a large purchase of Arm, a chip technology company. Nvidia said that it paid a $1.35 billion termination charge, which came out to a negative impact of 52 cents per share on a GAAP basis."

MY COMMENT

This was a GREAT earnings report.....especially considering the 52 cents per share termination charge for the ARM deal......which was tanked by various governments and regulatory boards.

As to the additional $15BILLION in stock buybacks to come.....what a waste of money.

Considering the current environment and all the issues that are plaguing business at the moment.....they did very well.

You know.....as an investor.....I NEVER look at or care what the so called "analysts" are expecting, recommending, or projecting. Who cares. ALL I care about is the ACTUAL business results.....the REAL numbers. Anything else is simply......BS.

 

Having ignored the markets....mostly.....for the past week......I see that this is where we are at this moment.

Stock market news live updates: Stocks end choppy session higher after FOMC minutes

https://finance.yahoo.com/news/stock-market-news-live-updates-may-25-2022-112741714.html

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

"U.S. stocks pushed higher at the close of a choppy session on Wednesday as investors considered a slew of company warnings on the impact of inflation to earnings alongside the Federal Reserve's latest communications about using their policies to rein in rising prices. The Fed's May meeting minutes reaffirmed that central bank officials saw additional 50 basis point rate hikes as appropriate over the next couple meetings.

The S&P 500 wobbled but then gained Wednesday afternoon after the release of the Fed minutes, which also noted that more aggressive tightening and "a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and risks to the outlook." The Dow and Nasdaq each also rose. Treasury yields mostly declined, and the benchmark 10-year yield fell to hold just above 2.75%.

Investors this week have also eyed a growing list of companies citing the effects that inflation have had and will have on results going forward. Retailers including from Walmart and Target last week to Dick's Sporting Goods (DKS) and Abercrombie & Fitch (ANF) this week slashed their earnings forecasts for the year as the companies absorbed rising goods and transportation costs. And elsewhere, Snap (SNAP) warned earlier this week that it would post weaker-than-expected sales and profit results this year as the macroeconomic environment "deteriorated further and faster than anticipated." This was taken as a harbinger of softer results for a bevy of ad-driven tech stocks, sending the Nasdaq Composite to its lowest close since Nov. 2020 on Tuesday.

As the grim company guidance piles up, Wall Street has been looking for signs that the Federal Reserve's interest rate hikes and monetary policy tightening will achieve bringing down inflationary pressures. The Fed's minutes from its early May meeting Wednesday afternoon reaffirmed that most monetary policymakers were considering rolling out additional 50 basis point rate hikes at the next two Fed meetings. The Fed raised rates by 50 basis points earlier this month for the first time since 2000, after having raised rates by just 25 basis point earlier this year.

"The challenge right now is we’re in this new chapter of the inflation story. If you’ll recall, last year it started with whether it’s transitory — turns out, it wasn’t. Then it became about the Fed at the end of last year and earlier this year, whether or not they would tighten significantly. And they did, and now all that’s priced in," James Liu Clearnomics founder and CEO, told Yahoo Finance Live. "And now what the market is looking at is are basically the fundamentals around how inflation affects corporate profitability and consumer demand."

And beyond the domestic concerns, a myriad of international concerns — from Russia's war in Ukraine, to China's ongoing COVID outbreak — have further infused volatility into the market.

"The Fed can't really do anything about what's going on between Russia and Ukraine, they can't really do anything about China's COVID zero policies ... and a lot of traders are starting to get concerned," Shawn Cruz, TD Ameritrade head trading strategist, told Yahoo Finance Live.

"The way the market to me is reacting to that, is one, there's de-leveraging going on. There are some liquidation events out there as well, and that is one of those 'selling begets more selling' type of environments. And then the other one is, there's just not enough confidence out there to come in there and meaningfully put money back to work," he added. "Once you start to see leverage start going back up, cash coming in from the sidelines, that to me would be an indication that there is at least a little bit more certainty in the outlook for a lot of these people on the sidelines to come back in."

2:15 p.m. ET: Fed minutes show support for another two half-point rate hikes while adding 'a restrictive stance of policy' could become appropriate

The Federal Reserve's latest meeting minutes Wednesday afternoon reaffirmed Fed Chair Jerome Powell's prior assertions that the central bank was weighing two more half-point rate hikes.

"Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings," according to the minutes. "Many participants assessed that the Committee’s previous communications had been helpful in shifting market expectations regarding the policy outlook into better alignment with the Committee’s assessment and had contributed to the tightening of financial conditions."

The Fed left room for further policy decisions to be informed by incoming data on the economy, which has recently softened. However, it also emphasized that its primary goal remained on bringing down inflation, and that as a result, a "restrictive stance of policy" could be needed.

"Participants agreed that the economic outlook was highly uncertain and that policy decisions should be data dependent and focused on returning inflation to the Committee’s 2% goal while sustaining strong labor market conditions," the minutes noted. "At present, participants judged that it was important to move expeditiously to a more neutral monetary policy stance. They also noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook."

9:12 a.m. ET: Durable goods orders disappoint in April

U.S. durable goods orders decelerated in April and were downwardly revised in March, offering an at least early sign that businesses may be pulling back on investments as economic uncertainties mount.

Orders for durable goods, or manufactured products intended to last at least three years, rose by 0.3% in April compared to March, the Commerce Department said Wednesday. This came in below the 0.6% rate consensus economists were expecting, according to Bloomberg data. In March, durable goods orders rose by 0.6%, with this rate revised down from the 1.1% previously reported.

Non-defense capital goods orders excluding aircraft also missed expectations, rising by 0.3% in April versus the 0.5% anticipated. This metric rose by 1.1% in March, and serves as a closely watched proxy for business investment. Still, non-defense capital goods shipments excluding aircraft, which factors into GDP, rose by a better-than-expected 0.8% last month.

"It’s entirely possible that the recent slowing is nothing more than a temporary reaction to the spike in energy prices; firms might be waiting to see how consumers respond," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in an email about the report. "So far, we see no evidence of any hit — housing excepted — but we also can’t rule out the idea higher rates are directly causing some capex [capital expenditures] to be deferred, even though firms are sitting on huge piles of cash accumulated during the pandemic."

"For now, a decent increase in capital spending on equipment in the second quarter seems assured, given the lags from previous strength in orders, but the outlook for H2 has become a bit more cloudy," he added.

7:55 a.m. ET: Dick's Sporting Goods becomes latest retailer to slash full-year outlook given 'evolving macroeconomic conditions'

Dick's Sporting Goods shares sank by more than 14% Wednesday morning after the retailer became one of the latest to lower its full-year earnings and sales guidance as economic uncertainty resurged.

The sporting goods retailer said it now sees adjusted earnings totaling between $9.15 and $11.70 per share for the 2023 fiscal year, with this range coming in well below the $11.70 to $13.10 a share seen previously. Comparable store sales will likely fall between 2% and 8% this year, the company added, compared to a prior outlook for sales to come in between unchanged and down 4%. Dick's Sporting Goods said it updated its outlook "to reflect the impact of evolving macroeconomic conditions," according to its earnings release Wednesday morning.

Following the release, the stock was on track to post a sixth straight day of losses, or its longest losing streak since early Dec. 2021, as shares fell in sympathy with other major retailers over the past week."

MY COMMENT

No big deal here.....is there anyone anywhere in the world that did not know that the FED is going to do 50 basis point rate hikes going forward? The real news in this little article is the FACT that the Ten Year Treasury has sunk to a yield of 2.75% totally IGNORING the recent rate hikes by the FED. We are right back to where we were.....before the rate hikes..... with historic nearly 100 year lows on the Ten Year Yield.

UNFORTUNATELY....I dont see any of the media talking about how this historic LOW ten year yield will be great for business especially the TECH businesses. They LOVE to tell us how the tech companies are so interest rate sensitive......but ONLY when the rates are going up.

Personally I consider the action of the Ten Year Yield as a sign of a little bit of impending stagflation and a sign of the continuation of the deflationary environment that the world has been stuck in for over ten years now. As a stock investor I dont really care about whether or not we are in recession......but I would guess that we are already in one. I think the action of the Ten Year AND the Durable Goods Orders data are signs of the current recession that we are in.

As I said.....as a long term investor......whether we are in or out of recession is IRRELEVANT to me. I ONLY care about the fundamental results of the businesses that I ACTUALLY own. AND.......so far earnings have been very nice for most of them.

My view of the companies that are slashing outlook is that most of them are simply.......jumping on the bandwagon NOW in order to get ahead of the issue and set up EARNINGS BEATS later on. In other words.......they are lowering expectations and lowering the bar for later on.