The Long Term Investor

What a BRUTAL three days for me. Friday a mid day show outside. It was about 104 to 106 degrees when we finished. Saturday an evening show....outside again. Temperatures ranged from about 104 to 96 degrees. AND....the icing on the cake......this afternoon....mid day, another outdoor show. Today was the hottest of them all ranging from about 106 to 108 degrees.

Very dangerous weather conditions for humans.

 

Looks like someone is doing well in the current economic conditions.

$3,374,629,000,000: Federal Tax Collections Set Record Through May

https://www.cnsnews.com/article/was...ederal-tax-collections-set-record-through-may

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

"(CNSNews.com) - The federal government collected a record $3,374,629,000,000 in total taxes in the first eight months of fiscal 2022 (October through May), according to the Monthly Treasury Statement.

Before this year, the largest October-through-May federal tax collections came in fiscal 2021, when the Treasury collected $2,833,846,070,000 in total taxes in inflation-adjusted May 2022 dollars.

This fiscal year’s October-through-May tax collections of $3,374,629,000,000 are $540,782,930,000 (or 19.08 percent) more than that.


The record $3,374,629,000,000 in total taxes that the federal government collected in the first eight months of this fiscal year included $1,934,657,000,000 in individual income taxes; $978,948,000,000 in social insurance and retirement taxes; $223,498,000,000 in corporation income taxes; $65,817,000,000 in customs duties; $53,384,000,000 in excise taxes; $21,633,000,000 in estate and gift taxes; and $96,692,000,000 in “miscellaneous receipts.”

While collecting its record $3,374,629,000,000 in taxes in the first eight months of fiscal 2022, the federal government also spent $3,800,854,000,000—and, thus, ran a deficit of $426,226,000,000.

The $3,800,854,000,000 that the federal government spent in the first eight months of this fiscal year was still less than the record $5,071,503,630,000 (in constant May 2022 dollars) that the federal government spent in the first eight months of fiscal 2021.

While federal spending has declined this year from last year’s record high, this year’s spending in the first eight months of the fiscal year is still more than the federal government spent in the first eight months of any year prior to fiscal 2020 (when it spent $4,445,575,070,000 in constant May 2020 dollars).

The Department of Health and Human Services continued to lead all federal departments and agencies in spending through the first eight months of fiscal 2022. It spent $1,054,754,000,000. It was followed by the Social Security Administration, which spent $839,061,000,000; the Department of the Treasury, which spent $769,511,000, including $423,100,000,000 for interest on the federal debt and $346,411,000,000 on “other” expenses.

The Department of Defense-Military Programs placed fourth, spending $470,865,000,000."

MY COMMENT

Looks like the government is recouping some of that FREE MONEY that is circulating out there. That is a.....WHOPPING.....increase....19.08%.....from the prior record collection.

 

Yeah......the Bitcoin CRASH. The HEDGE THEORY of Bitcoin is now pretty well dead. Rising interest rates and stock declines.......are NOT positive for Bitcoin.....contrary to the common thinking up to this point. Crypto is simply NOT a safe haven in times of financial turmoil.

 

Oh yes.....the markets. I forgot about them. A BAD open today.....an extension of Friday.

The yield on the Ten Year Treasury is now up to 3.28%. That is a HUGE increase from just a few weeks ago.....and a HUGE indicator of lack of confidence in the economy as it is being guided right now.

Not a good sign for mortgage rates.

 

Inflation is the big topic of the day today in the markets.

On Friday’s Hotter-Than-Expected US Inflation Data
Keeping a cool head will serve you well in the long run.

https://www.fisherinvestments.com/en-us/marketminder/on-fridays-hotterthanexpected-us-inflation-data

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

"Ouch. Today’s CPI report showed US inflation reaccelerating to 8.6% y/y in May—notching a new 40-year high—and stocks didn’t like it. The S&P 500 dropped -2.9% in price terms on the day, extending Europe’s earlier declines.[ii] Fast inflation and market volatility is a painful combination, especially for those trying to grow their assets over time to support living expenses. The fear of hardship is real, and we get it. So at times like this, we think it is best to breathe deep, think longer term and remember some first principles.

The precise reasons for sharp volatility are always impossible to pin down. On its face, the CPI acceleration was modest, and the 8.6% rate is but a whisker faster than March’s 8.5%. But it wouldn’t surprise us if the world’s expectations heading into today were a touch too optimistic. You see, for the past two months, the financial world’s general take on US inflation is that it is peaking. We saw it when the inflation rate hit its prior high in March—there was a lot of this is the top chatter. We saw it in April, when CPI decelerated to 8.3% y/y—then, it is finally easing was the general spirit. On both occasions, we counseled against that mentality and the follies of trying to predict such turning points in general.

Today’s market reaction is a prime example. Last month, as the world cheered April’s CPI slowdown, we cautioned:

We would love it if prices were really, truly offering American households some relief, and we do expect inflation to moderate as the year progresses. But this effort to pinpoint the start seems counterproductive to us. Markets aren’t myopic, and such inflection points will be clear only in hindsight anyway. In our view, keeping realistic expectations and a long-term perspective will be key to navigating the period ahead.

We say this because we can envision a world where April’s slight deceleration creates expectations that the worst is behind us. … We can see a risk that investors get too caught up in a the worst is over mindset and get blindsided if inflation remains stubbornly high, raising the temptation for knee-jerk portfolio moves. Four-plus months into a correction (sharp, sentiment-fueled drop of -10% to -20%), reacting to bad headlines is one of the most dangerous moves an investor can make.

Now investors are living that reality and its associated temptation. So let us reiterate our prior message: Pinpointing inflation turning points is impossible. Only now we say this not as admonishment, but as encouragement. Inflation defying popular expectations doesn’t mean the situation suddenly took a major, unforeseen turn for the worse. Rather, we think it means the crowd made a collective mental error of presuming data follow pre-set patterns and that one month’s movement surely signals a new trend. In our view, data have never worked like that. Whether we are looking at inflation, retail sales, industrial production, exports or what have you, all economic indicators are subject to monthly variability—sometimes seemingly big movements. Over time, those wiggles even out to a trend, but it is messy and only clear with several months’ hindsight.

So, we suggest not getting caught up in the short term. Instead, recognize that while data surprises can affect sentiment in a big way in the heat of the moment, sentiment itself is a short-term market force and can flip the other way on a dime. Remember that, notwithstanding daily price volatility, stocks tend to look about 3 – 30 months out, with the gap between expectations and reality the driving force. If economic data create lower expectations, then it lowers the bar for reality to clear. It takes less good news to deliver positive surprise and lift stocks over the medium and longer term.

Today, that bar looks quite low, and not just because May’s inflation report deflated investors’ nascent hopes. Yesterday, The Washington Post released a survey conducted jointly with George Mason University’s Schar School of Policy and Government, which found 66% of Americans think inflation will worsen over the next year.[iii] That is just one survey, but when economists see stuff like this, they warn inflation expectations will become a self-fulfilling prophecy—that when people expect prices to rise, they will buy more now to lock in lower prices, and their demand will drive prices even higher. We have seen little evidence of this in reality, mind you—inflation is a monetary phenomenon, not a psychological one. But the belief reigns and it, too, contributes to the general expectations for worsening inflation to hit economic growth hard. The latest global forecasts from the World Bank and OECD, released this week, added to that “stagflation” chorus.

In our view, this fear is what is weighing on stocks. To us, it looks very detached from market fundamentals. Owning stocks means owning a share of publicly traded companies’ earnings, and profit margins have so far been resilient. Businesses’ costs are up, but they have pricing power in our growing (yes, growing) economy. From a household budgeting standpoint, this is probably bad news, because that is the very inflation that shows up in CPI and forces many people to make tough choices. But from an investment standpoint, which is how we always approach these things, it means inflation thus far hasn’t proven deleterious for earnings at a fundamental level. That is the reality we think fear is blinding people to now. As it gradually—and perhaps subconsciously—dawns on investors, we see potential for stock prices to catch up.

As for the inevitable Fed angle, we don’t give much credence to the main claims that rate hikes aren’t yet working, requiring the Fed to move fast and furious from here. As we discussed yesterday, monetary policy moves hit at a lag—anywhere from 6 to 18 months or more, depending on the methodology economists use to study this issue. Even if this inflation stemmed from excess money supply growth, it would be unrealistic to expect the incremental move in rates since March to have an effect on inflation yet. Then too, in a world where inflation stems from the “too few goods” side of the “inflation is too much money chasing too few goods and services” maxim, the only way the Fed could get it to come down is with a severe destruction in demand for that limited supply of goods. Two rate hikes totaling 0.75 percentage point—and that leave the yield curve quite positively sloped and at low levels relative to history—won’t destroy demand to that extent. (Nor would anyone even want this demand destruction, considering it would be a byproduct of a Fed-induced recession.) In our view, looking to the Fed to fix this is about as misguided as trying to predict Fed policy in general.

That is the bad news. The good news: We don’t intend any political or ideological statements by saying this, but there are still reasons to think inflation is likely to slow within the foreseeable future. The New York Fed’s latest Global Supply Chain Pressure Index showed costs and constraints in the global shipping world are easing. China’s May export data, released yesterday, show ports there are back in action as COVID restrictions ease. In the energy world, producers are responding to high prices and feared shortages of oil and natural gas. The natural gas price spike triggered by a LNG export terminal explosion earlier this week is already incentivizing more US production, which should help stabilize global markets. So, too, should ramped-up oil production in the US and OPEC’s swing producers. US oil producers have already added 100 rigs this year.[iv] Stabilizing energy costs will benefit goods and services prices alike, as it should render the passing-on of energy costs to consumers more or less a one-time deal.

Therefore, take that deep breath. People near-universally expect inflation to be quite bad within the 3 – 30 month window stocks weigh most. That is what markets are pricing in—that fear. Even not-quite-as-bad inflation would therefore be a big relief for stocks. To us, this remains the most probable scenario over the foreseeable future."

MY COMMENT

It is a big danger to give too much credence to the FED and their policies. there si very little chance that their rate increases are going to have much impact over the next 6 months.....at least to inflation. They WILL have a big impact on the general economy......much of it psychological. They are well on their way to crashing the economy.

Demand Destruction will happen eventually. I mentioned the other day that I am seeing it happen in small businesses in my area. When it happens it will happen very quickly and the hit on the economy and consumer psychology will be BIG.

As to business fundamentals.......yes.....in the big business world things are still pretty good in terms of fundamentals. BUT.......what investor pays any attention to fundamentals any more? UNFORTUNATELY........what really counts......fundamentals.....are ignored by many people that "think" they are investors.

 

It will be interesting to see what the FED does this week. Everything.....all signs....say the rate increase should be 0.50%. What if it is higher than that?

It will mean that the FED........PANICKED.......and jumped the increase up in the face of short term news items lately. It will mean that there is no rational reason behind what the FED is doing....that they are being driven by public and political pressures NOT any sort of expertise.

SO.......what happens this week will give us some indication of just how screwed we are with the thinking of the current FED.

 

Here is our day today.

Stock market news lives updates: Stocks slide as inflation, rate hike jitters mount

https://finance.yahoo.com/news/stock-market-news-live-updates-june-13-2022-112834178.html

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

"U.S. stocks traded sharply lower Monday, with traders betting a fresh decades-high print on inflation will force the Federal Reserve to get even more aggressive than previously anticipated to help ease rising prices.

The S&P 500 and Nasdaq each dropped more than 2% shortly after the opening bell, extending losses from the overnight session. The S&P 500 also traded in bear market territory, with its intraday level setting it on track to end more than 20% below its recent record high from January. The Dow sank by more than 500 points, or about 1.8%. Treasury yields rose across the curve, and the benchmark 10-year yield jumped to its highest level since late 2018.

Cryptocurrency prices slid after digital currencies lender Celsius Network said Sunday it was pausing all withdrawals, swaps and transfers between accounts on its platform "due to extreme market conditions," according to a statement. Bitcoin prices (BTC-USD) fell by more than 13% to below $24,000, or the lowest since December 2020, in the wake of the announcement, while Ethereum prices (ETH-USD) tumbled below $1,200. And crypto-related stocks including Coinbase (COIN) and MicroStrategy Incorporated (MSTR) also came under renewed selling pressure.

For the broader markets, investors nervously looked ahead the Federal Reserve's latest policy-setting meeting later this week, with a rate decision set for Wednesday. Up until Friday's hotter-than-expected monthly Consumer Price Index, traders widely believed the meeting would set the stage for another half-point rate hike by the central bank, bringing the target range for interest rates between 1.25% and 1.50%. However, after last week's data showed an unexpected pick-up in inflation to a fresh 40-year high of 8.6% in May, investors have raised their bets on an even bigger move by the Fed.

Fed funds futures, which help track traders' predictions for where the Fed's target interest rate band will land, shifted quickly after Friday's report and showed increased bets on an even more pronounced 75 basis point hike. As of Monday, Fed funds futures priced in an about 25% probability of three-quarter point hike and an around 75% probability of a 50 basis point hike, according to CME Group data. As recently as mid-last week, investors were pricing in a more than 90% probability that the Fed would opt for a 50 basis point rate hike.

"There is very little in the details of [Friday's CPI] report to suggest that inflationary pressures are easing," Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note Friday. "The surge in energy prices this month means that headline inflation will remain close to 8.6% in June. Together with the continued strength of the latest activity data, that bolsters the argument of the hawks at the Fed to continue the series of 50 bp [basis point] rate hikes into September and beyond, or even to step up the size of rate hikes at coming meetings."

Such a super-sized rate hike would add more pressure to already-volatile stocks by further raising the cost of borrowing for businesses. But at the same time, equity markets have also remained in turmoil as investors have had to weigh whether inflation left to run at current decades-high rates will push the economy into a deeper downturn. Already, at least one survey has shown consumer sentiment plunged to its lowest level since at least the 1970s in the face of rising prices. And given all these uncertainties, the Fed may well choose to continue down its previously telegraphed path to implement only half-point hikes in the near-term, some economists said.

"This is not a quick process. But we also don't want to disrupt the capital markets. And so I think moving steadily, in terms of 50 basis points, which is the messaging they've been giving the market, is the right course of action," Hal Reynolds, Los Angeles Capital chief investment officer, told Yahoo Finance Live on Friday. "And they're going to be data-driven, and they can continue to do that into the fall.""

MY COMMENT

NOTHING else going on today or this week. It is simply FED week and INFLATION week. It is absolutely INSANE for anyone to think that the couple of minor little rate increases that we have had to date will or should have had any impact on inflation. It takes a lot longer than a few months and a couple of increases for the impact to be seen.

The CLAMORING for higher increases is simply mild panic. It is not going to do any good to raise quicker. What the FED should be doing is a steady strategy of rate increases in the 0.50% area.

 

So......long term investors......are we near a bottom. I dont think so.

I hate to be a broken record....but I dont see any sort of CAPITULATION out there in the financial world. We are just entering a BEAR MARKET.....I believe we are certainly in one now. We are just entering a RECESSION......I believe we are in one now.

All of my recent comments on where we are right now remain unchanged.......we are at least 6 months and another 10% to 25% from a bottom. That is my view.

BUT......I continue to be fully invested for the long term as usual.

Oh yes the markets......they are showing us some real escalation today in the lack of confidence in the FED. At the moment:

DOW (-2.34%)
SP%500 (-3.42%)
NASDAQ (-4.25%)

Those are some HEFTY one day drops....although....we are only about a little more than an hour into the day.

 

That is a HUGE amount of IMPROPER PAYMENTS......$281 BILLION. Nearly real money.

 

The poor SP500. Well.....all the averages actually....but at the moment I am only looking at a chart of the SP500.

It is AMAZINGLY down in the past five days by......8.26%. That is five trading days. That is a BIG loss in just five days for an average that contains approximately the largest and best 500 companies in the USA. It is now down.....year to date..... by 20.66%......a BEAR MARKET.

ALL of the follo0wing are negative:

One month (-6.24%)
Three month (-9.60%)
Six month (-19.20%)
Year to date (-20.66%)
One year (-11.21%)

If you go out to Three Years......it is positive by......+27.78%. Last time it hit a new high was about December 31, of 2021 at about 4766. At the moment it is at 3774. Last time it was this low was in the first week of February of 2021. We are NOW back to where we were SIXTEEN and a HALF months ago.

Someone.......please....... switch the old market time machine to "forward" from the "backward" on the control panel.