The Long Term Investor

That sounds like a very comprehensive list of the basic investor mistakes....Emmett. Totally agree.

 

A few random notes.

We are having a good open today. A nice way to start the week. Although we are less than 30 minutes into the first of five full market days. No doubt it will be the usual week for investors. A very wild ride on the market roller coaster.

Oil is up today.....with no end in sight for how high it will go this summer. That means higher gas prices.......and inflation.

The airline cancellation disaster seems to be spreading to more carriers. An amazing example of how screwed up everything is. It is also an example of how quickly businesses and industries that were formerly pretty competent can deteriorate and start to collapse. I bet they wish they never got caught up in the threats to fire their employees based on vaccinations.....that dont seem to work.

For the first time......in a long, long time.....on the financial boob tube earlier today.....I heard a guest that I consider pretty realistic and rational.....using the "D" word. By "D" word I mean....."depression". So....that tells me that industry people are talking and thinking of this as a possibility. This ties in with what we have been hearing from many business and banking leaders lately. I dont care what the "economists" think....but the people that are on the ground running businesses, dealing with customers, consumers, suppliers, seeing the real time business data and financials.....I think they probably have a pretty good handle on what is going on......REAL TIME.

Taxes....compliments of the Wall Street Journal today:

"Individual Income Tax Payments on Pace to Reach Record Level
Business owners and investors are paying more, but CBO officials can’t fully explain why tax revenues are hitting high as a share of the economy

WASHINGTON—An unprecedented gush of income tax revenue is flowing into the federal government, driven in part by investors and business owners, and the size and speed of the increase has surprised even the nation’s fiscal-policy experts.

Individual income tax collections are poised to reach $2.6 trillion, or 10.6% of the economy in the fiscal year that ends Sept. 30, according to the Congressional Budget Office. That is up from 9.1% in 2021 and would mark a record in the 109-year history of the tax, topping the war-tax receipts of 1944 and the dot-com boom of 2000."

I cant see the rest of the story....sorry. But....it is not a good thing when the government is sucking up more and more of the economy in the form of taxes. I would much rather see individuals and business keep that money to invest and use as they need to and wish to......especially in a time of potential recession.

At least......NONE of the above items are things that will or should impact my investing strategy. I invest in business....NOT....macro and micro events.

AND.....the markets are STILL green nearly a half hour into the day......a major victory. As usual the key time of the day will be in about an hour or so when we hit the 10:30 to 11:00 time period (Central time). The market often moves significantly at that general time of the day........the dreaded East Coast lunch hour.

 

HERE is a very important story. Speaking of the "D" word above. This is another "D" reference......a very important one.

Stories of survival by veterans who were at Normandy still resonate this D-Day anniversary

https://www.yahoo.com/now/stories-survival-veterans-were-normandy-100102180.html

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

NO BOLD FOR THIS ARTICLE......it is ALL an important lesson.

"Monday marks the 78th anniversary of D-Day, when Allied forces launched the largest military invasion by land, air and sea in history to retake northwest Europe from Nazi forces.

The Associated Press had two dozen writers and photographers among the Allied forces as they landed on France's Normandy coast on June 6, 1944 in an assault code-named "Operation Overlord."

At 9:32 a.m., AP received the news flash from Gen. Dwight D. Eisenhower’s London headquarters that read: ALLIES LAND IN FRANCE."

The United States, Canada and the United Kingdom deployed more than 5,000 ships, 11,000 airplanes and 150,000 soldiers, landing on several beachheads in Normandy and parachuting or riding gliders inland into Nazi-occupied territory. More than 20,000 Americans lost their lives on Normandy's shores.

Here are highlights of stories that were previously published in The Dispatch from three central Ohio men who landed at Normandy, fought in Europe and survived.

Lawrence McCauley

Lawrence McCauley, now 99, tried to join the Marines in January 1942, but his eyeglasses prevented it. Months later, the Army drafted him.

McCauley was a member of the 65th Armored Field Artillery Battalion, trained to drive trucks armed with .50-caliber machine guns, halftracks and landing craft, just in case. In England, preparing for the D-Day invasion, he became fast friends with Otto Lutz, a tall Chicagoan.

“We were all very close,” he said of his unit when he was interviewed in 2020 at the age of 97 and living in Lewis Center. “You knew about their wives and children — everything you could know about your buddy, because there was nothing else to talk about.”

He and Otto were next to each other on a landing craft as it approached Omaha Beach. The front door dropped open and a bullet hit Otto in the forehead. McCauley remembers looking back and seeing his friend’s face sink beneath the water.

“There was no stopping,” he said. “Our orders were `Don’t stop,’ because you’re better off as a moving target. That’s hard.”

The 65th fought their way off the beach that day and climbed the bluffs. McCauley remembers the feeling as he reached the top: “Best grass I’ve ever seen.”

He was involved in the hardest fighting through France and Belgium, including the Battle of Hurtgen Forest and the Battle of the Bulge.

On April 11, 1945, McCauley was among the first to reach Buchenwald, a Nazi concentration camp located atop Ettersberg hill about five miles northwest of Weimar in east-central Germany. They liberated 21,000 emaciated inmates.

“They were packed in like sardines,” he said.

Later, McCauley’s unit stopped a train, opened it up and found young Jewish girls inside. They directed them to safety behind American lines.

In October 2020, McCauley was awarded the French Legion of Honor medal by Guillaume Lacroix, the consul general for France to the Midwest. The medal, the highest French award for military and civil merits established by Napoleon Bonaparte in 1802, was presented to McCauley for his efforts during World War II to rescue the French people from Nazi occupation.

Donald I. Jakeway

Donald I. Jakeway recounted before his death in November 2019 the blitzing heat of a bullet flying by his face.

Jakeway, a Johnstown resident, jumped with the Army 82nd Airborne's 508th Parachute Infantry into Normandy 15 minutes after midnight on D-Day.

Storms of flak rocketed through the sky around Jakeway as he parachuted down. He landed in a tree in a churchyard. After he cut himself out and landed on the ground, it took him 10 days to reunite with his company, during which time he traveled with the British and another U.S. company. He fought through Normandy for 37 days.

“Europe had been under occupation for three to four years,” Jakeway said. “They had fortified (Normandy) ... Everyone was just like slaves.”

Read more: D-Day memory vivid for Johnstown man

American, British and Canadian forces landed on five beaches along a 50-mile stretch of France’s Normandy coast, where they met stiff resistance from well-entrenched Germans in concrete bunkers placed at strategic points along the coast and beaches with mines and other anti-tank obstacles as well as wooden stakes, barbed wire, and metal tripods to impede landing craft and the movement of troops once ashore.

Within three months, however, the northern part of France would be freed by more than 2 million Allied troops and the invasion force would be preparing to enter Germany, where they would meet up with Soviet forces moving in from the east.

Jakeway continued to fight until a sniper bullet struck him in the chest on Jan. 31, 1945. He recovered in an English hospital until that August, then he was sent home.

Vance Hill

Vance "Red" Hill, now 104, didn't have to fight for his country in World War II.

A native of Iberia in Morrow County, he was married with two children and another on the way. At 26, he could have taken a deferment.

Hill's wife didn't want him to go. Neither did his church. But Hill saw his 17-year-old brother going off to war and felt he should do the same.

"I thought it was as much my fight as it was his," a now-104-year-old Hill said in a 2020 interview from a nursing home in Richland County at the age of 102.

His service in the U.S. Army included landing in Normandy on D-Day Plus One. Once he waded ashore from a landing craft and headed inland, Hill served an important and dangerous role as a point scout who went ahead of most of the forces.

"You didn't last long," Hill said of scouts. "Not many made it through. I had both of my hands almost blown off."

He recalls the day he almost lost his hands, which occurred several months after D-Day when he remembers getting to the edge of a town.

"I ran into a machine gun," he said. "When I hit the ditch, it felt like every bullet was going right through me. That's when they dropped the mortar in."

He spent one night in the field hospital, then was flown to the United Kingdom. Hill's time as a soldier was over after 15 months. He later received a Purple Heart."

MY COMMENT

Quickly shrinking numbers of D-Day vets are visiting France and the Normandy American Cemetery today. All are in their mid to late 90's. They will ALL soon be gone and with them ALL direct memory of this event.

I remember being part of ceremonies at the American Cemetery at Normandy in about 1959.....as a grade schooler living on an Army base in Germany. Memories of the events of D-Day were very fresh at that time.

I also remember having many teachers in High School that were involved in WWII. A history teacher that was in the first waves of paratroopers that went in at Normandy. A chemistry teacher that was a first hand witness to Pearl Harbor, as a nurse on base during the entire attack.

OF course.....growing up on Army bases and attending school on Army bases......everyone in my grade level had fathers that had been in WWII. It was a very interesting and fun way to grow up as a kid...surrounded by tanks, jeeps, and all things military etc, etc, etc, on Army bases.

World War II's D-Day: Photos reveal world's largest amphibious invasion

https://www.foxnews.com/lifestyle/pictures-look-back-d-day

 

Nothing new going on today.....not much financial news that is new or different. Investors are just hanging in there and waiting.

Stock market news live updates: Stocks climb back after losing week

https://finance.yahoo.com/news/stock-market-news-live-updates-june-6-2022-111728983.html

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

"U.S. stocks rose Monday as the indexes aim to rebound from a week of losses on the heels of strong May jobs data that affirmed Federal Reserve officials were likely to continue sharpening monetary conditions.

The S&P 500 was up 1%, and the Dow Jones Industrial Average gained 200 points, or 0.6%. The tech-heavy Nasdaq advanced 1.7%.

All three major indexes closed lower after a sell-off Friday rounded out another down week on Wall Street. The declines came after a stronger-than-expected May jobs report showed hiring kept at a slower but still-robust tempo last month – a sign of continued strength in the labor market expected to keep policymakers on pace with interest rate-hiking plans.

“As Fed speakers consistently remind us that the path towards draining inflationary pressures from the economy is going to be ‘bumpy’ and ‘painful,’ the market agrees as it navigates between seeing the next recession around the corner to witnessing a still healthy economic backdrop,” LPL Financial Chief Equity Strategist Quincy Krosby said.

The Labor Department’s May jobs report Friday showed 390,000 were added to the U.S. economy in May, while unemployment held at a rate of 3.6%.

Later this week, investors will get the latest gauge on how quickly prices are rising across the U.S. when the Bureau of Labor Statistics releases its latest Consumer Price Index Friday.

The headline CPI index is expected to have climbed in May but stay flat from last month’s reading on a year-over-year basis. Economists forecast the broadest measure of CPI rose by 8.3% in May, on par with April’s advance. Over the month, CPI is expected to show an increase of 0.7%, up from 0.2% last month.

Fed officials enter a blackout period this week, which limits the extent to which staff and Federal Open Market Committee (FOMC) members can speak publicly or give interviews ahead of their next policy-setting meeting set for June 14-15.

In final comments before Fedspeak pauses for the week, several policymakers have given a nod in public remarks to multiple 50 basis point rate hikes ahead.

“Right now it’s very hard to see the case for a pause,” Vice Chair Lael Brainard told CNBC in an interview Thursday. “We’ve still got a lot of work to do to get inflation down to our 2% target.”"

MY COMMENT

As you can see from the above there is really NOTHING much going on this week. Same old, same old for investors. thank God for the FED blackout this week. If only we could shut them up all the time....the markets would be much more healthy.....not to mention investor sanity.

Markets are STILL hanging in there today....even though the Ten Year Treasury is UP and touching 3% yield today.

I am personally STILL feeling good.....as an investor. It helps that my personal financial situation is disconnected from my market money. For those with time on their side......it is nice to see dividends and new 401K and other money going into the market at these low levels. The future compounding will be AMAZING.

 

The story of the day. It is so nice to look at my account and see my Amazon share balance in the hundreds of shares rather than the previous less TINY share balance.

Amazon Gains as Stock Split Lowers Price Tag for Retail Buyers

https://finance.yahoo.com/news/amazon-gains-stock-split-lowers-133720725.html

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


"(Bloomberg) -- Amazon.com Inc. shares rose on Monday, in the first trading session following a 20-for-1 stock split, the e-commerce company’s first such move in more than two decades.

Shares gained as much as 3.1% to $126.18, with the stock touching its highest level in more than a month. The stock participated in a broad rally for technology and internet companies that came as China eased Covid restrictions. The company could also be supported as the split makes the price more attractive to retail investors. When the split was first announced in March, Amazon said making the stock “more accessible” for average investors was a reason behind the decision.

“While we view this event as a largely non-fundamental one, we believe a stock split and potential retail trading activity could provide an incremental catalyst to turn sentiment,” wrote Rohit Kulkarni, an analyst at MKM Partners.

The stock is coming off a two-week gain of about 14%, but it remains down more than 10% since March 9, when the split was first announced. So far this year, Amazon shares are down 25%, compared with at 22% decline in the Nasdaq 100 Index.

Among other notable names, Apple Inc shares rose 1.9% on Monday, while Microsoft Corp. gained 1.3%, Alphabet Inc. added 2.4%, and Meta Platforms Inc. rose 1.8%.

The year’s weakness has come as investors dump tech and other growth names amid an economic backdrop marked by rising interest rates, slowing economic growth, and high inflation. Analysts have also recently pared back their expectations for online retail revenue growth.

Despite the recent weakness in the stock, Wall Street remains almost universally positive on Amazon’s prospects, as about 95% of the analysts tracked by Bloomberg recommend buying it, given long-term growth prospects in online retail and cloud computing. Compared with the 56 positive analysts, there is just one firm that recommends holding it, and two advocating selling. The average analyst price target points to upside of more than 40%.

Amazon is not the only major company to announce a split this year. Google parent Alphabet announced a 20-to-1 of its own in early February; that is scheduled to take place next month. Shopify announced a 10-for-1 stock split in April, and electric-vehicle company Tesla Inc. in March said it would ask investors this year to approve the creation of additional shares for the purposes of another split, following a 5-for-1 exchange in 2020.

MY COMMENT

Perhaps this will spur a little rally in the stock. It is certainly up very nicely today.....+4.8% at the moment. We are seeing a little bit of a TECH RALLY today. They all are very over-sold and do not deserve the recent market action. BUT....that does not mean they will not go down from here over the short term.

As to Amazon......my primary concern as an owner....is the recent loss of the Consumer CEO. That means that the top management of the prior version of the company is now gone. We will now have new management going forward on the tech side of the company and the consumer side of the company. This sort of management change over is a dangerous time for any company. How the company weathers this change will be a big sign for investors as to the internal strength of their management system.

Microsoft went through this same sort of change over in the late 1990's and early 2000's. For them it was a DISASTER. Fortunately they have now recovered and have very good management in place. The Hallman/Ballmer years at MSFT were a bad joke on investors. Hallman came earlier than Balmer and if my memory is right he only lasted about a year as President of the company.

Hallman lived about five houses down from us. I never could understand why they gave him the job. He was really not qualified and had no experience at MSFT. In hindsight......his hiring was an early signal that the judgement of Bill Gates might be suspect. It was a big topic of gossip among the neighborhood ladies group when he got fired.

 

Well at least on the musical side of things.....we are booming. We are on track to hit at least 100 shows this year at good venues. Most are regional.

On the real estate side of this.....local.....area, Central Texas.......we now have about 35 active listings the most in a year or so. From talking to local realtors......houses are still selling well with prices coming in at about 100% to 110% of list price. But...the market is definately slowing down in terms of time on market. I see some houses taking longer to sell and some actually having to lower their price. There is a good mix of houses available for buyers right now in our neighborhood.

 

Even though the markets faded today....I was still in the green. I believe I beat the SP500....but.....not sure because the Schwab website has not caught up with the Amazon split and is showing them at "0" today.

In any event.....I know I was green even with Amazon having "0" gain....so i will take it. Any green day these days is fine with me.

 

I LOVE this little market soap opera. So.....I cant help posting the latest episode. High DRAMA indeed.

Cathie Wood's Ark Rebounds: A Dead-Cat Bounce?

https://finance.yahoo.com/m/5ab86214-a319-32fa-8318-9c842b9e5b01/cathie-wood-s-ark-rebounds-a.html

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

"Is it just a dead-cat bounce or the sign of something bigger?

Renowned investor Cathie Wood’s flagship Ark Innovation ETF (ARKK) - Get ARK Innovation ETF Report is on the rebound. It has bounced back 24% from its May 12 intraday low.

The fund remains off 54% year to date and off 73% from its February 2021 high.

In the past few weeks Wood’s disruptive technology stocks have rebounded in sync with other stocks. The tech-heavy Nasdaq Composite has climbed 10% from its May 20 intraday low.

But many experts don’t expect the rally to last. Wood’s choices –- and other tech stocks -- have been hammered by rising interest rates. And the Federal Reserve is poised to lift rates further.

Rising rates hurt less established tech stocks because they likely won’t generate much profit for the next few years, while the income provided by bonds is rising.

Slowing economic growth also will probably limit Wood’s stocks.

Among Ark Innovation’s four biggest holdings: No. 1 Zoom Video (ZM) - Get Zoom Video Communications, Inc. Class A Report, the videconferencing service, has dropped 40% this year; electric-vehicle titan Tesla (TSLA) - Get Tesla Inc Report has lost 32%. video-streaming platform Roku (ROKU) - Get Roku, Inc. Class A Report has fallen 61%, and financial services firm Block (SQ) - Get Block Inc Class A Report has slid 48%.

Trailing the S&P 500

As Ark funds have tumbled in recent months, Wood has defended her efforts by noting that she has a five-year investment horizon.

And the five-year track record of Ark Innovation could indeed have given investors comfort until May 9. The fund’s five-year return beat that of the S&P 500 until then.

But the five-year annualized return of Ark Innovation totaled 10.18% through June 3, behind the S&P 500’s 13% return.

Still, Wood’s investors aren’t deserting her. Ark Innovation enjoyed a net inflow of $1.24 billion in the six months through June 3, according to VettaFi, an ETF research firm.

Stagdeflation Coming

Meanwhile, Wood discussed her macroeconomic views in a recent webinar.

While many experts expect a bout of stagflation -- sluggish economic growth combined with rising inflation -- she sees stagdeflation. That’s slow growth combined with falling inflation.

“We are probably going to see more deflationary forces at the end of all this than inflationary forces,” Wood said. “We are in the early stages of seeing this.” Consumer prices soared 8.3% in the 12 months through April.

Naturally, Wood says this will be a good time for her “disruptive” technology stocks: “During tough times, innovation gains traction.”

Morningstar’s View

On March 29, Morningstar analyst Robby Greengold issued a scathing critique of Ark Innovation.

“ARKK shows few signs of improving its risk management or ability to successfully navigate the challenging territory it explores,” he wrote.

Wood countered Greengold’s points in an with Magnifi Media by Tifin. “I do know there are companies like that one [Morningstar] that do not understand what we're doing,” she said."

MY COMMENT

The media loves this story-line. It is fun to follow. Who said stock and fund investing has to be boring?

I DO AGREE......very much......with Wood on her view that DEFLATION will be the critical negative issue. Like her, I strongly believe that DEFLATION is the default economic condition that has been going on for the last 13 years and once we see a relaxing of inflation......we will be right back to world wide deflation.

I believe that the current inflation is simply primarily supply chain issues and distortion of the economy on many levels......like what we are seeing with air travel lately. Once all the FREE MONEY that is sloshing around in the economy disappears....we will see the REAL economic conditions.

 

This story is not about Amazon......but this is another high level executive leaving Amazon. She WAS.......the chief executive of Amazon Web Services.

Peloton hires Amazon cloud exec to be new CFO in latest shakeup in top ranks

https://www.cnbc.com/2022/06/06/pel...ll-be-replaced-by-amazon-cloud-executive.html

This is the second high level......Chief Executive......person bailing from Amazon in the past week.

 

I know roadtonowhere08. It gives me pause when I see such high level executives leaving a company.....especially at the same time. Is there conflict in the executive ranks? Is it random chance? Do they know something that is not public? Is the new CEO hard to work with? Who knows.

It is certainly a danger time for the company. All anyone can do is wait and see if the new people that take over these top level jobs are as good or better than those leaving. There is also danger that the culture of the company that made it the huge success it has been up to now will be lost. It is like many things in business.......it is all about leadership.

 

LOL......I looked at my Schwab account tonight and........GASP......I had lost MILLIONS of dollars. The account showed that Amazon had lost $2322.21in value today.....drooping by $2322.21 to a closing price of $124.79.

Apparently the Schwab site is unable to handle the Amazon split.......so decided to simply show it as a loss.

They did show the new share balance.......and a loss of $2322.21 on every one of those new shares. At least I did not get a margin call........yet.

 

Thanks Target. They jumped on the CYA train for future earnings.

Stock market news live updates: Stocks resume losses after Target warns on profit

https://finance.yahoo.com/news/stock-market-news-live-updates-june-7-2022-113644334.html

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

"U.S. stocks fell early Tuesday after a profit warning from Target renewed concerns about the economic outlook.

The S&P 500 sank 0.8%, and the Dow Jones Industrial Average shed nearly 200 points. The tech-heavy Nasdaq slid 1%. Meanwhile, the 10-year U.S. Treasury benchmark held above 3%.

Target (TGT) was in focus during the morning trade after the retailer said Tuesday that it's aiming to trim down excess inventory by offering discounts, canceling orders and reevaluating its expenses – an announcement that comes just weeks after the company shocked investors with a dramatic earnings miss that sent shares down 25%.

Target's stock fell roughly 6% at open. The decline also weighed on retail peers amid renewed worries about the toll of inflation and supply chain imbalances on corporate margins. Shares of Walmart (WMT) and Costco (COST) each fell about 2% at the start of trading.

"The fear in the market is that earnings estimates, underpinned by weaker net profit margins, could become the next layer of focus," LPL Financial Chief Equity Strategist Quincy Krosby said in a recent note.

The moves Tuesday morning extend a streak of back-and-forth sessions as investors assess the economic outlook and brace for central bank policymakers to ramp up interest rates in an effort to cool inflation.

All three major indexes closed in the green on Monday, though well off the session’s highs after wavering from a morning rally. The S&P 500 closed up 0.3% after retreating from a jump of more than 1%, the Dow erased a 300-point gain to end just above breakeven, and the Nasdaq climbed 0.4%.

“For now, the market sees a Federal Reserve trying to navigate a painful and bumpy road, yet trying to find a soft exit,” Krosby said. “And the market finds itself between wanting to believe in the rallies but not believing that the Fed can negotiate a soft landing.”

Inflation is top of mind for investors this week, with the Bureau of Labor Statistics’ May Consumer Price Index (CPI) due out Friday. Wall Street will be looking for signs that prices have peaked as it hopes for a pause on monetary tightening in the autumn months.

Outside of Friday’s CPI print, investors face a lighter economic and earnings calendar this week."

MY COMMENT

Looks like the negative focus is turning to earnings. The snowball of earnings warnings is picking up speed as it rolls down the hill. This is certainly bad news for the short to medium term.

It is also bad news for jobs. As this stuff picks up steam companies are going to cut back on hiring and jobs. We might have millions of low end jobs. BUT.....the middle and high end jobs are about to crash if this keeps up. those that are merrily job hopping or siting at home not concerned about working......better wake up.

This is yet another indicator of the recession......that we are probably already in.

 

Where are we as to the markets right now?

Well in terms of the short to medium term......NOT GOOD. I think this year is TOAST. I dont think we are going to see a positive end to this year....even though we are about 6 months out. Although....this is just off the top of my head.....and......the markets can turn quickly.

I see this year ending up at between NEGATIVE 10% and NEGATIVE 18% on the SP500. Not enough to wipe out the great gains from 2021.....but it will put a dent in those 2021 returns.

OK.....what about after that? Well I believe there is a significant "possibility" of a multi-year negative market. I see ZERO chance that leadership in the country will make needed changes to deal with the current economic problems and issues. I see this situation lasting from about a year and a half.......to......three years.

I STILL see the markets as having significant additional downside of........another 10% to another 25%.

I dont say this from a position of being negative. I say it from a position of trying to anticipate the worst case and best case range of possibilities. I like to be mentally ready for possible outcomes.

Even if the worst case happens.....I will not change what I do. I will just continue to be fully invested as usual. This little event.....no matter how long it lasts....will follow the usual course. There will be rallies here and there....it will not just be straight down. I will catch those rallies.....for what they are worth.

The good news is.......it will end.....and if the end is closer than I anticipate.....well ok. I do remember very well the Carter years and the FACT that this sort of economic MALAISE can last for a long time. I also remember the BOOMING economy that came after it was over....that lasted for basically the next 20 years till the Dot-Com crash.

 

For those that want to follow what business leaders are seeing as front line people dealing with customers and the retail environment......here is more detail on the target announcement.

Target ratchets up discounts and cuts guidance in response to more cautious shoppers

https://finance.yahoo.com/news/targ...r-discounts-guidance-100033736-110004100.html

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

"Target is battening down the hatches on its business as its shoppers become more cautious in their spending due to spiraling inflation for food, gas, and shelter.

The discount retailer — a few weeks removed from seeing its stock plunge 25% amid a surprising earnings miss at the hands of a slowdown in consumer spending — said Tuesday that it's aiming to cut inventory by offering discounts, canceling orders and taking a harder look at expenses. Target entered the second quarter with inventory up 43%, which the company conceded several weeks ago when it reported first quarter profits was too high relative to consumer demand.

Target's actions are meant to "right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment," the company stated.

'We also expect inflation and higher costs to be persistent'

The company will also look to push through price increases in certain categories to help offset stubborn inflation in transportation and logistics.

"We actually do see a continued strong sales environment, traffic and the top line continue to be strong," Target CFO Michael Fiddelke told Yahoo Finance. "But over the past several weeks what we have been able to continue to assess is the broader retail environment — and I think as has been reported pretty widely at this point — the level of inventory in retail is high. And we also expect inflation and higher costs to be persistent."

Fiddelke was hesitant to say the actions — which are far from the norm for Target in the past five years —were tantamount to the retailer preparing for a recession, stressing that the markdowns will be most acute in discretionary categories such as home goods as consumers curtail some spending.

"It's really a shift in what's at the top of the shopping list for the consumer versus what I would characterize as a slowdown," Fiddelke added. "And so in some categories, it's certainly a slowdown versus what we expected, but overall traffic and the top line continue to be strong."

In light of the actions, Target cut its second quarter operating margin outlook. The company said it's now targeting second quarter operating margins in a "range around" 2%. Previously, Target was looking for margins "in a wide range centered around first quarter's operating margin rate of 5.3%.

Target maintained its full year revenue growth outlook of low to mid-single digit percentage.

Amid the current economic backdrop, Target's drastic actions on inventory could have widespread ramifications on retail and investors in the sector.

Walmart could be forced to follow suit and liquidate inventory more aggressively in the second quarter at the expense of margins. Walmart exited the first quarter with its inventory up 30% from the prior year, which it acknowledged was too high when it reported earnings a few weeks ago.

The warning from Target could also lead to further earnings estimate cuts on retailers as industry discounting picks up, inflation remains high, and consumers re-trench. The entire sector has been under pressure since a disappointing retail reporting season in mid-May, and the news out of Target suggests we are in the early innings of sharp consumer spending pullback that retailers weren't expecting."

MY COMMENT

What can I say.......we just have to get used to the current conditions......for a while.

 

AND......BINGO. The markets turn green for the day.

As to the last two posts......never mind. LOL.

NO.....I still stand by them. BUT....realize that ALL commentary is simply short term opinion. I like to follow the economy and short term events....BUT....I do NOT act on this short term stuff or my short term pinions. It is a mental game.

The ONLY way to invest is for the LONG TERM......and for me.....that does not ever change.

 

I just looked and.....I am in the green. Sure it is less than $500.....but I will take it as a starting point for today.

I see that Schwab has now fixed the issue they were having with reporting the Amazon split and price yesterday. My multi-million dollar LOSS has now been reversed and my account is back to normal. The wonders of technology.

 

This is not a good thing for the markets......sounds like some of the mechanics of the markets are not working well.

Liquidity is terrible’: poor trading conditions fuel Wall Street tumult
Small trades are triggering outsized price swings in the world’s biggest capital markets

https://www.ft.com/content/cbc47bbf...traffic/partner/feed_headline/us_yahoo/auddev

"Traders’ ability to seamlessly buy and sell stocks, bonds and other financial products on Wall Street has deteriorated sharply this year, adding fuel to the big swings on the world’s biggest and deepest capital markets. Liquidity across US markets is now at its worst level since the early days of the pandemic in 2020, according to investors and big US banks who say money managers are struggling to execute trades without affecting prices.

Relatively small deals worth just $50mn could knock the price or prompt a rally in exchange traded funds and index futures contracts that typically trade hands without causing major ripples, said Michael Edwards, deputy chief investment officer of hedge fund Weiss Multi-Strategy Advisers. He added: “Liquidity is terrible.” The fraught conditions have collided with a big shift in the global economy that has caught many portfolio managers off-guard: a growth slowdown, rising interest rates and intense inflation. Unprepared for the turn in sentiment, traders have abruptly repositioned their portfolios.

The liquidity drought is also affecting vital markets that companies use to fund themselves and governments tap to finance public spending. Minutes from the US central bank’s latest policy meeting published last month showed that officials were concerned with the problems being created in the Treasury and commodities market by weak liquidity. Line chart of Market value of publicly traded US companies ($tn) showing About $9tn has been shaved off the value of US stocks this year.

The trading landscape changed dramatically after policymakers in Washington and Brussels sought to safeguard Main Street from Wall Street in the wake of the 2008 financial crisis. Through a series of regulations introduced over the past 12 years, banks are now required to hold bigger capital cushions to protect their balance sheets against major swings. It has meant banks now hold far fewer assets, like stocks and bonds, making them less nimble at responding to investors’ requests to buy or sell, and gumming up the pipes that connect buyers and sellers.

“People [banks] are not willing to commit capital,” said Edwards. In debt markets, holdings of corporate bonds among the primary dealers that underwrite the US government’s debt have gradually declined over the past decade, according to data from the New York Federal Reserve, taking another leg lower this year.

Banks have pulled back, in particular, from holding debt that is more vulnerable to rising interest rates, cutting their net positions in higher-quality bonds with a maturity of 10 years or longer into negative territory.

Meanwhile, the health of the US government bond market — a benchmark for trillions of dollars in assets globally — is at its worst since the March 2020 market meltdown, according to a Bloomberg index. “It is a frustration,” Jordan Sinclair, a research director at hedge fund Capstone, said of the lack of liquidity. “The global financial crisis was a failure of the banking industry. They took too much risk and gave too much leverage and it made sense for the regulators to make sure that could not happen again. But there are consequences.” That has manifested in choppier trading.

Sinclair estimated that the Vix index, a gauge of volatility in the US stock market, had jumped more than 5 points on a single trading day nine times in the 15 years before the financial crisis. In the 15 years after the crisis, it has happened 68 times. And yet during that period, trading losses incurred by major US banks have been manageable and not threatened the overall financial system. It is a fact not lost on traders and investors, particularly after the fallout from the collapse of family office Archegos last year was broadly contained.

High-frequency trading firms like Citadel Securities and Jump Trading have filled part of the gap left by big Wall Street banks, but investors said the algorithms that help execute trades through those types of operators often meant that trading capacity was automatically reduced when stocks began to swing violently.

In May, investors hoping to trade e-mini futures on the S&P 500 — one of the most important contracts that big money managers use to bet on the direction of the market — saw tiny offers to buy and sell when looking at their trading screens. Goldman Sachs registered that on some days less than $2mn worth of the contracts could be bought or sold at the price actively quoted in the market, the lowest level since March 2020.

Separate data from JPMorgan Chase underscore the fragility of the system. The bank measured how much of an order imbalance — the difference between buy and sell orders in S&P 500 e-mini futures — it took to move futures 1 per cent in a five minute period. It took an order of around $900mn to move futures by that amount in May, around 67 per cent smaller than the size of a trade imbalance that would have been required from 2017 to 2019.

The bank’s strategists found that a similar phenomenon occurred in futures tracking US government bonds, warning that “liquidity recently started declining again, and the market depth over the last three months is now the lowest since March 2020”. The weak liquidity has amplified volatility in the stock market, investors say.

In back-to-back trading sessions last month, Walmart and Target suffered their biggest declines since 1987 after each warned about intensifying cost pressures. The slides wiped $71bn from the pair’s market valuation. Outsized daily moves in shares have also been recorded in Facebook-owner Meta, Amazon and Netflix, while measures show the volatility of blue-chip companies like Apple, Microsoft, Visa and Coca-Cola has surged.

“There is plenty of trading happening but in terms of order size it has been smaller in recent months,” said Mary Phillips, deputy head of portfolio management at Dimensional. “I think that if you were the kind of asset manager trying to do large block trades quickly and you’re really specific about what you want to trade you could face liquidity challenges.”"

MY COMMENT

With current technology and market structure......I dont think anyone has a clue what or why anything happens in the markets. We pile regulations and rules on top of regulations and rules and no one knows how they will impact liquidity or market action. The markets limp along......well LURCH along presently......and still somehow manage to work day to day. BUT......who knows when some hidden issue will cause some cascading collapse of market technology. I guess it is a miracle that the system even works at all.

Kind of makes me think about the old days when orders and everything else was done with slips of paper and clerks had to record and reconcile everything by hand.

No doubt much of the extreme volatility and market conditions we now see are due to the impact of technology and regulation on the market structure. This stuff is now so complex it is beyond human understanding.

 

For those waiting breathlessly for the SpaceX Starlink IPO......


Elon Musk says an IPO of SpaceX’s Starlink satellite internet business is still ‘3 or 4 years’ away

https://www.cnbc.com/2022/06/07/spa...-musk-says-offering-is-3-or-4-years-away.html