The Long Term Investor

Some good posts up above Smokie. Yes....you are so lucky to have a pension....most of the country does not.

 

WOW......that was a great three day run to end the week. We need to string a few of these weeks together.

I ended the day strongly in the green with ALL of my stocks being nicely positive today. PLUS.....I got a beat on the SP500 by 0.73% today.

With the great gains this week......I am now down by ONLY.....yeah right......20.58% year to date. BUT....considering that I was up by somewhere around 34% last year.......(I am too lazy to look up the actual amount).......I have only LOST less than a year in my account.

It is nice to add some money from gains this week....it gives me some cushion for IF the markets decide to tank in the near future.

 

One thing that most people on here know.......a loss of 20% in an account.......is worse than it sounds. That is because it takes a higher GAIN in the new reduced account balance to get back to where you started.

For example:

You start with an account of $100,000 and you lose 20%.

You are now at an account value of $80,000.

Your $80,000 needs to grow by $20,000 to get back to your $100,000 starting value.

BUT.......20% of $80,000 is only.......$16,000......which takes you to $96,000.

To get back that 20% loss and get back to $100,000.....you need to gain of 25%....on your new LOWER account value of $80,000.

BUMMER.

 

Well Zukodany.......over the long term it is always a situation of......WTF......was the panic all about.

 

HERE is the AMAZING story of the week.

DOW year to date (-8.60%)
DOW for the week +6.24%

SP500 year to date (-12.76%)
SP500 for the week +6.58%

NASDAQ 100 year to date (-22.30%)
NASDAQ 100 for the week +7.15%

NASDAQ year to date (-22.46%)
NASDAQ for the week +6.84%

RUSSELL year to date (-15.92%)
RUSSELL for the week +6.46%

A great way to enter the three day weekend.......TGIF.

 

HERE is a good lesson for all......REAL INVESTORS.

How to Not Panic

https://ofdollarsanddata.com/how-to-not-panic/

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

"Does the following quote seem accurate to you?

"Throughout the pandemic, the nation lacked a uniform policy about gathering places, and there was no central authority with the power to make and enforce rules that everyone had to obey. Each community acted on its own, doing as its elected officials thought best."

What about this one?

"For young survivors of the pandemic, life would never be the same. Like shell shocked soldiers, they bore emotional scars."

I’m assuming that you, like me, found both of them to be somewhat true. But what I didn’t tell you was that these quotes aren’t about COVID-19. No, both of them actually come from Albert Marrin’s Very, Very, Very Dreadful, an account of the Spanish flu of 1918. Though Marrin is summarizing an event that occurred over 100 years ago, his words describe a world eerily similar to our own.

I was reminded of these similarities after a friend asked me how I was able to stay calm during a market crash. I told him that its because I’ve spent a good amount of time studying history. And, in doing so, I’ve come to realize that a lot of what we experience isn’t as unique as we think it is.

As the saying goes, “history doesn’t repeat itself, but it often rhymes.” And rhyme it does. Consider what Marrin stated on the frequency of pandemics:

Flu pandemics are nothing new. Medical historians think the first one struck in 1510, infecting Asia, Africa, Europe, and the New World. Between the years 1700 and 1900, there were at least 16 pandemics, some of them killing up to 1 million people.

Given the regularity of these pandemics, you can see why our reactions to them have shown similarities over time. But humans repeat themselves in other ways across history as well.

For example, consider how the U.S. Senate recently passed the Sunshine Protection Act in an effort to make Daylight Savings Time (DST) permanent across the U.S. This would mean that, if passed by the House and the President, the U.S. would no longer adjust its clocks twice a year. No more “spring forward” and no more “fall back”, just the same time all year round.

Unfortunately, Congress tried this already in 1974 and it didn’t work. In fact, it was a disaster. After enacting the permanent DST, eight children in Florida died in predawn car accidents due to the early morning darkness. The policy became so unpopular across the U.S. that it was reversed by Congress after only eight months.

But the “rhyming” of history isn’t limited to global health and politics, it’s true in markets as well. As I summarized here, the U.S. stock market typically declines by at least:

• 10% every other year
• 30% every 4-5 years
• 50%+ once a generation

And guess what? Since I made my first investment on July 6, 2012, I’ve seen the market decline over 10% on five separate occasions—2015, 2016, 2018, 2020, and today. That’s five declines in a 10-year period or, coincidentally, once every other year as the historical averages suggest.

Of course this decline could be different. If you look at a chart of the five corrections I’ve experienced since I started investing in 2012, you will see that our current pullback stands out:


It’s even more concerning when market veterans like Josh Brown say that, “this is one of the most treacherous environments that I ever seen.” And I don’t disagree. With high inflation, geopolitical uncertainty, and asset prices declining across the board, things aren’t looking great right now.

But what did you expect after a year like 2021, which was arguably the craziest year in markets since the late 90s? Have we forgotten just how silly it all was? Consider this tweet from Drew Dickson near the height of the madness:


What would you rather buy for $2.3 million, a picture of a rock or 3,700 square foot waterfront property overlooking Tampa Bay? In hindsight it’s ridiculous that such a question was ever asked, but here we are.

After such a frothy year in markets, it makes sense that we would see a return to fundamentals. Unfortunately, the transition back sucks. It sucks because there isn’t much we can do about it beforehand and there isn’t much we can do once it starts to happen either.

Yes, you can try moving to cash/bonds early, but when exactly do you get out? Go too early and you may have to sit on the sidelines for years while the market rockets higher. And if you do get out, how do you know when to get back in? It’s psychological hell on the exit and the re-entry.

This is why, despite writing about the froth in markets last year, I knew there wasn’t much you could do about it. Yes, you can make minor tweaks to your portfolio along the way (i.e. “sin a little”), but you mostly have to roll with the punches. So why would you panic? What good is there in reacting to something that you cannot control?

If you disagree, you either (1) invested money you couldn’t afford to lose, or (2) didn’t understand your true tolerance for risk until now. If either of those is true, that’s unfortunate, but you learned something valuable for next time. Given the record of history, you should expect events like this to happen with some regularity.

This is why my favorite speech from the film Margin Call is when Jeremy Iron’s character rattles off all the major asset bubbles across history from memory:

1637, 1797, 1819, -37, -57, -84, 1901, -07, -29, 1937, 1974, 1987-Jesus, didn’t that f**k me up good. -92, -97, 2000 and whatever we want to call this.

It’s all just the same thing over and over; we can’t help ourselves.

Clever writing you might think. Margin Call is fiction after all. How about some non-fiction then? Here’s Jesse Livermore, arguably the greatest trader in Wall Street history:


There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.

This is how to not panic. You know history. You understand the risks. And, most importantly, you know yourself. Then you let the chips fall where they may. You don’t obsess over the headlines. You don’t try to predict the future. You enjoy your life. You go out with friends and family. You make cherished memories. You laugh. You cry. You remember that things like this happen. And you remember that they will happen again."

MY COMMENT

As I have said many, many, times........investing is SIMPLE. All you have to do is pick realistic, rational, great companies, and ride them for the long term. OR....better yet......put it all in the SP500 and ride it for the long term.

Unfortunately the VAST MAJORITY of people can not do this.....they can NOT tolerate the pain of the down times.

That is one reason for this thread.......to show how one investor (ME) and others on here.......simply sit thorough all the pain and come out the other side.

NOTE: I use the term "REAL INVESTOR" in the opening sentence of this post because.....that was my name on the old, long time ago,......MSN Money Boards. I started posting way back in the mid 1990's about my usual long term investing and my MODEL PORTFOLIO of stocks that I held for the long term.

I have been investing the same way for over 45 years and posting the same......"STUFF"........online for over 27 years. I am a very simple minded person.......kind of like Forrest Gump I suppose.......I just do the same thing over, and over, and over, and never change. Meantime......all around me are thinking how much of a MORON I am by not jumping on the latest greatest money making FAD.

 

HAVE A GREAT HOLIDAY WEEKEND EVERYONE. LETS NOT FORGET THE PURPOSE OF MEMORIAL DAY.

My dad was a career military officer.....fortunately he was not killed on duty. Growing up in the military......I knew a number of kids whose fathers died in the Vietnam War.

So take some time to remember those that have died in the military to protect your rights.

 

Here is a very interesting......opinion piece.....on Cathy Wood. The article notes that initial investors in her primary fund have now made a total round trip......up and back down.... and are now NEGATIVE. I have never owned any of her funds......and never will. In my opinion her stock picking is very erratic and very off the cuff. The media made her a sensation and now they love to bash her. My view of her falls on the negative side of the scale.

No matter what side you fall on....or if you simply dont care....this is an interesting article.

The Rise and Fall of Wall Street’s Most Controversial Investor

https://nymag.com/intelligencer/2022/05/the-rise-and-fall-of-cathie-wood.html

 

It was very RARE to see any positive comment on the inflation data this past week. In spite of data that came in better than expected the TYPICAL media response was the usual DOOM&GLOOM.

I used to subscribe to Investors Business Daily back in the old.....pre-internet days.......when investors subscribed to daily financial newspapers. My paper of choice was IBD because it was more detailed and more finance and investing oriented than the Wall Street journal.

Here is the IBD take on the cause of the positive week we just completed. I totally agree.

Stock Market Closes Sharply Higher As Key Inflation Rate Lower Than Expected; Tesla, Boeing, Apple Lead Indexes

https://finance.yahoo.com/m/501adf9f-a708-36e1-a093-00327e67bc07/stock-market-closes-sharply.html

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

From "Investors Business Daily":

"The stock market closed sharply higher Friday, extending the rally to a third day, to start the three-day weekend on encouraging inflation data. Tesla (TSLA), Apple (AAPL) and Boeing (BA) were among the blue chip winners.

The S&P gained 2.5%. The Nasdaq composite jumped 3.3% and the Dow Jones Industrial Average closed 1.8% higher. The small-cap Russell 2000 gained 2.7%. Volume was mixed, rising on the Nasdaq but falling on the New York Stock Exchange compared to the same time Thursday.

Meanwhile, the yield on the benchmark 10-year Treasury note slid to 2.74%. West Texas Intermediate crude oil rose again and was trading around $115 per barrel.

Positive inflation data was helping stocks end the week on a high note. Core personal consumption expenditures — the Federal Reserve's preferred inflation indicator — rose 4.9% in April, slower than March's 5.2% increase.

The inflation data "raised expectations that inflation is peaking," said economist Ed Yardeni. He said he still expects the Fed to raise interest rates by a half point in each of the next two meetings in June and July. "The S&P 500 should continue to move mostly sideways this year, consolidating its gains since the start of the bull market in 2009 and correcting the pandemic valuation excesses," he wrote in a social media post........"

MY COMMENT

It will be interesting to watch the inflation data now that we are getting into a time period where the comparisons to past data is aging.

Congratulations to Investors Business Daily for reporting the simple FACT that the inflation data was better than expected and that this was the probable cause of the rally yesterday. Most of the other financial reporting that I saw IGNORED this FACT or reported it as a negative.

 

For comparison.....here is a more typical financial media article on the above......with the fear mongering negative take on what should be and is actually......GOOD NEWS.

Fed's preferred inflation gauge rose 4.9% in April, still near 40-year high
Inflation gauge above 2% for 13th consecutive month

https://www.foxbusiness.com/economy/feds-preferred-inflation-gauge-rose-april-near-40-year-high

(BOLD is what I consider exaggerated opinion content in this little article that is taking the DOOM&GLOOM side of what is actually positive data.......starting with the headline above)

"A key measure of annual inflation that is closely watched by the Federal Reserve continued to run hot in April as widespread supply disruptions, extraordinarily high consumer demand and worker shortages fuel rapidly rising prices.

The personal consumption expenditures price index, which measures costs that consumers pay for a variety of different items, showed that core prices – which exclude the more volatile measurements of food and energy – soared 4.9% in the year through April, according to the Bureau of Economic Analysis.

That measurement is the Fed's preferred gauge to track inflation; it marks the 13th consecutive month the gauge has been above the central bank's target range of 2%. Still, it was slightly below March's measurement of 5.2%, and is down from the 39-year high of 5.3% that was recorded in February.

In the one-month period between March and April, core prices soared 0.3%, suggesting that prices are leveling off, but are not yet falling. The slowdown in inflation in April largely stemmed from a drop in the price of gasoline and other energy sources. Gas prices soared in March as a result of the Russian invasion of Ukraine, then cooled off slightly in April. Prices have since returned to the highest level on record.

Including food and energy, the inflation gauge jumped 6.3% in April from the previous year, holding steady near last month's measurement of 6.6%, which was the fastest pace since 1981. On a monthly basis, the headline gain climbed by just 0.2%.

The PCE report was accompanied by data on household spending, which showed that consumers shopped at a rapid pace in April, with personal spending climbing by 0.9% before accounting for inflation and 0.7% after adjusting for price increases.

The data is further evidence of a spike in prices illustrated by a separate measure – the consumer price index – which showed inflation rose by 8.3% in April from the previous year, which is also near a 40-year high.

Raging inflation has inflicted financial pain on millions of U.S. households, particularly low-income families, eroding wage gains and setting up a massive political challenge for President Biden, who has seen his approval rating sink in conjunction with the rising prices.

It has also forced the Federal Reserve to begin paring back easy monetary policies put in place during the pandemic. Policymakers already lifted the benchmark interest rate by 50-basis points in May and have signaled that similarly sized hikes are on the table at upcoming meetings.

Minutes from the U.S. central bank's May 3-4 meeting released on Wednesday show that policymakers stressed the need to raise interest rates quickly in order to bring consumer prices closer to their 2% goal – and are prepared to move "rapidly" in order to do so.

"Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings," the minutes said. "Many participants judged that expediting the removal of policy accommodation would leave the committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.""

MY COMMENT

OBVIOUSLY this article is emphasizing the NEGATIVE even though the data was actually positive. I have BOLDED the little subtle language used in this article as an example of what i was seeing in the general financial media yesterday. Nearly EVERY article I saw......in my opinion....slanted this story to the negative side regardless of the political leanings of the source. DOOM&GLOOM and FEAR MONGERING......sells in the modern financial media.

 

Perhaps a bit of good news for house buyers......on a local and a national level.

Our little neighborhood of 4200 homes NOW has 21 active listings for sale. About half are below $1MILLION and about half are above. The highest are in the $2.5MILLION range.....the lowest in the low $800's. I think this is the most active listings we have had in a long time. BUT......this time of the year we would normally have at least 150 active listings.

Of course......it has been more than two years since we have had a normal market around here. The INSANITY of cash buyers, multiple offers, and lack of inventory started about......THREE YEARS AGO......around here and has escalated since.

The good news on the national level is that mortgage rates have leveled off at about 5%.I know that is higher than the rates we were seeing in the low 3% range for the past years......but.....those rates were insanely low and once in a 100 year event. Even 5% is a very nice low rate by historical norms over the past 40-50 years......so buyers should be happy to get that rate if they can.


Mortgage Rates Fall to 5.1% in Biggest Drop Since April 2020

https://finance.yahoo.com/news/us-mortgage-rates-fall-5-140000735.html

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

"(Bloomberg) -- US mortgage rates posted the biggest drop in more than two years, offering homebuyers a slight reprieve from this year’s massive surge in borrowing costs.

The average for a 30-year loan declined to 5.10% from 5.25% last week, Freddie Mac said in a statement Thursday. That was the biggest decline since April 2020, but rates are still well above the 3.11% level at the end of last year.

While rates slipped for the second week in a row, their rapid rise over the past four months has started to take a toll on demand. New home sales, measuring signed contracts, dropped to the lowest level since the start of the pandemic lockdowns, according to government data released this week. A gauge of US pending home sales also decreased in April for a sixth straight month, data showed Thursday.

“Mortgage rates leveling off is a lifeline for prospective homebuyers already dealing with inflation and record-high listing prices, and welcome news for the housing market at large,” Joel Berner, Realtor.com’s senior economic research analyst, said in an email. “Dark and stormy is the current mood, but a period of steadier rates below recent highs will give buyers, sellers, and builders alike the time to adjust to the new financial environment.”

The Federal Reserve is raising interest rates to combat inflation, raising affordability concerns for buyers who are struggling to find properties. The median mortgage payment for new purchase applications in April was up 8.8% from a month earlier due to higher rates and rising home prices, according to Mortgage Bankers Association data released Thursday.

At the current 30-year average, a borrower with a $300,000 mortgage would pay $1,628 a month, roughly $346 more than at the end of last year.

The dip in rates will offer lower borrowing costs, but home prices have been on the rise for two years with a shortage of listings making it hard for potential buyers to crack the market. Economic uncertainty and the worsening affordability situation has raised questions about whether the housing boom will run out of steam.

“Mortgage rates decreased for the second week in a row due to multiple headwinds that the economy is facing,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Despite the recent moderation in rates, the housing market has clearly slowed, and the deceleration is spreading to other segments of the economy, such as consumer spending on durable goods.”

MY COMMENT

This should be good news for buyers looking for a home.

The REAL question is.....with all the uncertainty are housing prices going to go down........or even worst case......crash. I doubt it......but.....I have seen at least 4-5 real estate crashes over my lifetime and sold during a few of them. So......who knows.

Here in my area I doubt there will be any drop in prices of homes. jobs in the TECH business are pouring into this area and demand for housing at all price levels is extremely strong.

The house across the street from us just sold (privately) for $2.3MILLION. the people moved in a few days ago. I did not see the parents but I did see one of their kids that was about three years old.......so I know they are relatively young, probably upper 30's or younger. I continue to be AMAZED at the money that younger people seem to have now. I have never seen so many people so young with so much money before in my lifetime.

 

Personally I consider a reasonable financial plan for most people to include:

IRA/401K. (max funding each year)

A house.

Brokerage Account.

This would be a basic minimum financial plan that should give nice security and protection for a nice future.

A bonus would be to add some sort of personal property or hard assets to the above as a hedge. Something like antiques, art, collectables, perhaps some silver or gold in a small amount. Whatever it is.......buy the BEST OF THE BEST according to what you can afford and make sure it is something that has an ACTUAL market........and......has been shown to hold and have value.

Unfortunately CRYPTO......has not held up as the hedge that people thought it would against inflation or a falling stock market......it is following the stock markets down.

 

The markets will be closed on Monday for Memorial Day. So we will have a short week next week. We will be riding a THREE DAY RALLY.......and.......the first positive week in a long time.....when we open on next Tuesday. Lets have some POSITIVE THINKING for another good week next week. VISUALIZE MONEY.

Here is a preview of the short week next week.

Short week, a new streak, and the jobs report: What to watch in markets this week

https://finance.yahoo.com/news/what-to-watch-in-markets-this-week-may-31-2022-153030161.html

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

"A bounce in U.S. stocks last week snapped a seven-week losing streak for the S&P 500 and Nasdaq, while the Dow logged gains for the first time in eight weeks.

These gains ended the longest weekly losing streak in over a decade for the S&P 500 after the index tip-toed into bear market territory. All three major indexes logged weekly gains of at least 5%, buoyed by a batch of upbeat economic data and more positively received earnings reports from the retail sector.

The S&P 500 has snapped a losing streak of this length only three other times in history — 1970, 1980, and 2001 — and twice the index rose 33% over the next 12 months, according to data from LPL Financial.

“Of course, to keep things honest, [performance after] the [decline] in 2001 was rough sledding,” LPL’s Ryan Detrick pointed out; over the next 6 months the S&P 500 fell another 14%.
Wall Street will be off on Monday in observation of the Memorial Day holiday.

Investors are expected to take their cue from a flurry of key employment data in the holiday-shortened final week of May when trading resumes Tuesday.

The Labor Department’s closely-watched jobs report will offer a snapshot of U.S. employment as concerns mount over uncertainty in the economic outlook. May’s jobs data is expected to reflect a slowdown in hiring from a red-hot prior reading of 428,00 jobs, with economists looking for 325,000 jobs added or created last month, per consensus Bloomberg estimates.

With a number of big name companies reporting inflation-related profit pressures and seeing their stocks slide in recent weeks, market participants have grown wary firms could lay off workers and pause hiring to cut costs

On the employment front, investors also have the ADP’s report on private payrolls – a precursor to the government’s main jobs report — the Labor Department's Job Openings and Labor Turnover Survey, or JOLTS, and weekly jobless claims in the queue.

The consumer confidence index out Tuesday will serve as another important gauge of economic sentiment, with investors keeping a close eye on consumer resilience amid continued talk of recession.

In recent trading days, a favorable batch of quarterly results from major retailers helped at least temporarily mitigate concerns over the toll of inflationary headwinds could take on profit margins.

“Based on their earnings, along with other trends such as declining consumer confidence and real incomes, the consumer suddenly looked much more vulnerable,” Commonwealth Financial Network Chief Investment Officer Brad McMillan said in a note. “As goes the consumer, so goes the economy and ultimately the market.”

Indeed, if company forecasts hold true, macroeconomic pressures are likely to show up more meaningfully in second quarter results.

The term “inflation” was mentioned at least once during 398 earnings calls held by S&P 500 companies from March 15 through May 24, research from FactSet indicated, with a similar number – 338 – mentioning “supply chain” in roughly the same period.

Moreover, the S&P 500 reported earnings growth of 9%, marking the lowest since the fourth quarter of 2020, and 68 companies tracked by the index provided negative EPS guidance for Q1, the highest since year-end quarter of 2019, per FactSet.

“If the economy is nearing recession’s door, job layoffs will climb further, and it is too early to rule out more staff cuts in the weeks and months ahead,” FWDBONDS Chief Economist Christopher Rupkey said in a recent note. “High-flying tech companies have seen their share prices plummet which will force management to tighten their belts, and the biggest expense for most companies is always labor.”
Earnings season is winding down, but more reports are due out in the four-day week, with companies including Salesforce.com (CRM), GameStop (GME) Chewy (CHWY), and HP (HPQ) set to report quarterly results.

"This is nothing more than a bear bounce in our opinion,” Eddie Ghabour, co-founder and managing partner of Key Advisors Group, told Yahoo Finance Live. “When you look at these bounces we’ve had, they’ve been on very light volume, there's not a lot of conviction.

Ghabour also elaborated that data that has resulted in steep selling across equities in past weeks was first quarter data, and that figures for the current quarter may come in worse, warning of a “very treacherous market in the next few months.”"

MY COMMENT

NO......we are not out of the bear market woods yet. Over the next few months we will see if the economy goes into "technical" recession. We will also see the impact of the next FED rate increase and where we are heading with jobs, supply chain, and inflation.

SO......there is plenty of room to go down from here. Not to be all negative......there is also a chance....although I believe it is a lesser chance.....that we will look back and see that right now was close to the bottom.

I STILL say worst case there is potential for another 15-25% DOWN from here. If we go into recession and start to see the hot jobs market fold up and go away.......that would be positive in my view for the markets.

So bottom line.....for long term investors that are just sitting and waiting......who cares. It will be what it is. I note that the SP500.....even after the horrible start we have had this year is ONLY DOWN by (-12.76%). Considering the horrible weeks we have had all year I think that is actually really good. I am actually surprised that it is only down that far........considering the events of the year to date. That current year to date figure for the SP500........gives me a bit of confidence that we will hit the bottom with the SP500 never reaching a loss of 20%.

Keep in mind that I am speculating abut short term events and performance and that is simply guesswork. I certainly dont trade on this sort of speculation since I remain a fully invested all the time investor for the long term and do not trade my account.