The Long Term Investor

Here is the first indicator of.......REALITY.

Key Fed GDP tracker turns negative, signaling recession is here
The Atlanta Fed's GDPNow model estimates -1.0% growth for Q2

https://www.foxbusiness.com/economy/key-fed-gdp-tracker-turns-negative-signaling-recession-here

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

"The Federal Reserve's key real-time model for tracking U.S. economic activity has turned negative, signaling that the nation could already have entered a recession.

The GDPNow gauge, a widely watched measurement from the Atlanta Federal Reserve Bank, indicated Thursday that real gross domestic product shrank by 1.0% in the second quarter from April through June.

While the official advance estimate of Q2 performance will not be released for another month, this preliminary reading shows the second quarter in a row of negative growth in the economy after GDP contracted 1.6% in Q1.

If further readings confirm that the economy did, indeed, shrink in Q2, the technical criteria for a recession – which is defined by two consecutive quarters of negative growth – will be met. However, the National Bureau of Economic Research (NBER) is the authority that makes the official determination.

Economists expect some economic slowdown from the interest rate hikes that the Fed implemented as it attempts to rein in inflation, which hit a four-decade high in May.

Fed Chair Jerome Powell said Wednesday that there was some risk that policymakers might go too far in slowing economic growth, but that failing to bring inflation to heel represents a greater risk.

The GDPNow tracker already signaled earlier this month that the economy was headed for imminent recession, when it showed two weeks ago that economic growth in the spring fell flat to 0%."

MY COMMENT

We will have to wait about a month or so for the actual official data to be releases.

As to the National Bureau Of Economic Research......I would bet that they will take the position that we are NOT in a recession even.......when.....the second quarter comes out negative. I can see it coming. If it happens they will make themselves irrelevant as EVERYONE will acknowledge that we are in a recession.

 

NICE.....we hit yet another Friday and weekend tomorrow. I have multiple shows over the weekend......the usual little road trips.......150 miles and another one that is about 100 miles.

Every Friday that we get to tick off another week of this stuff is a positive step into the future.

 

HAPPY FRIDAY......freedom day.......that is freedom day Friday, the start to another weekend when we will be free from the markets and all the day to day DRAMA of the economy and stock markets. In addition this will be a 3 day weekend with the Forth Of July on Monday. So we get an extra day of freedom from the markets.

At this moment.....early in the day....all the averages are negative.

 

What is amazing today is the Ten Year Treasury. It is WAY DOWN recently including today. The current yield is......GASP.....2.816%.

You would think that this would have some impact to the positive side for the markets. This is a very significant drop in the yield from the recent yield highs. In spite of the FED increases the Ten Year is back close to the bottom of the 100 year historic range.

Some good news for people that might be in the market for a mortgage.

 

Even though there is much talk about short term markets and economic events on here.....that is NOT what counts. Investors need to keep their focus on the long term and not get too caught up in the short term speculative DRAMA. There is no need to let yourself get jerked around by the short term markets financially or psychologically. Keep focus on your long term strategy and goals.

2022’s Difficult First Half Isn’t Destiny
Past performance doesn’t predict future returns.

https://www.fisherinvestments.com/en-us/marketminder/2022s-difficult-first-half-isnt-destiny

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

"Stocks had another tough day Thursday, officially closing out the past six months as the S&P 500’s worst start to the year since 1962. That, and all of its associated pain and frustration, is the bad news. But there is a modest silver lining: Despite what you may have seen in the numerous pieces on this topic, that factoid means exactly nothing for returns over the next six months and beyond. Stocks aren’t serially correlated, and past performance doesn’t predict future returns.

To show you this, we crunched first- and second-half returns for every year from 1926 through 2021. That is a data set of 96 years—a pretty significant sample size. In this stretch, the correlation between first-half and second-half returns is -0.099.[ii] For those who are a little rusty on statistics, the correlation coefficient measures the relationship between two variables. It ranges from 1.0 to -1.0, with 1.0 signaling they move in the same direction always, 0 meaning no relationship, and -1.0 meaning they always move in opposite directions. So, the -0.099 (or if you prefer to round, -0.1) correlation between first- and second-half returns means they have a very, very slight tendency to move in opposite directions—but it is a relationship so slight that it is functionally meaningless.

Now, that figure includes the 51 years where the S&P 500 rose in both the first and second half—years that are less relevant to the situation today. It also includes the 13 years when the S&P 500 rose in the first half and fell in the second. So let us zoom in on the remaining 32 years when stocks fell in the first half. The second half was positive 17 times and negative 15. That makes the probability of a positive second half roughly a coin flip (maybe a little better).

So no, it doesn’t mean the second half is automatically positive—but it also doesn’t mean returns will automatically stay bad. It means stocks will do what they do—look forward, pricing in expected conditions over the next 3 – 30 months, and not backward at the last 6. So the question is: Is there a high likelihood that things go much worse over that stretch than the expectations that stocks have already priced in? Given the abundant forecasts for recession—and hyper focus on all the overlapping potential contributors, including inflation, energy prices, rate hikes and all the rest—we think it is fair to assume stocks have been pricing in some measure of recession risk. A mild recession probably wouldn’t pack much (if any) negative surprise potential at this point, and avoiding recession would be a pleasant surprise for many. In our view, that tilts the balance favorably.

That is a mid-to-longer term outlook, we should note. We aren’t predicting when stocks will turn around. We don’t think it is possible to do so. Inflection points are only ever clear in hindsight, and having the humility to acknowledge and account for this is key to making beneficial longer-term decisions. But we do think that over the foreseeable future, when all is said than done, stocks are likely to finish significantly higher than they are now—and if you are investing for long-term growth, this, rather than the near-term moves, is what matters most. Capturing that upside after enduring this negativity is vital to investors who need equity-like growth over the longer run to finance their goals and needs."

MY COMMENT

What investors do or dont do now will be the key to what they do in the future. those that jump around and let the markets jerk them around will not do well. those that simply grit their teeth and hang in there with a strategic investing plan and quality investments will.....at some point....move forward and achieve new highs in their accounts.

Take your pick which one you wish to be.

 

The current downturn IS a good time to sell any losers that you are not satisfied with. It is an opportunity to lock in a loss on those positions for tax purposes and at the same time reinvest that money into better stocks at bargain basement prices.

I dont have anything that I would sell. BUT.....if you have a company that no longer meets your investing criteria....this is the perfect time to make a change....and....get a tax break for doing so.

 

On the topic of selling.

When to Sell Stocks at a Loss
Experts discuss the behavioral and tax factors behind when to lock in a loss.

https://money.usnews.com/investing/articles/when-to-sell-stocks-at-a-loss

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

"Markets remain heavily volatile and firmly in the red in June 2022. The equity and bond market sell-off that began in January persists amid decidedly stubborn inflation and higher-than-expected interest rate hikes.

The latest consumer price index report from June 10 showed U.S. inflation figures at an 8.6% year over year increase for May, surpassing consensus expectations. As a result, Federal Reserve Chairman Jerome Powell raised the federal funds rate by 75 basis points shortly thereafter, the biggest such move in 28 years and a stark contrast to previous statements favoring a series of 50-basis-point increases.

These macroeconomic events precipitated another sharp sell-off, with the S&P 500 and Nasdaq both falling into bear market territory, defined as a drop of 20% or more from recent highs. Investors holding stocks that outperformed during the COVID-19 pandemic, such as Netflix Inc. (ticker: NFLX) and Meta Platforms Inc. (META), are likely nursing heavy losses.

While the Reddit and TikTok retail investing crowd might chant "buy the dip" and loudly attest to their "diamond hands" – a term referring to investors who opt not to sell in the face of losses or market downturns – the decision on whether to sell at a loss is more complex than blindly bag-holding through all market conditions.

A variety of behavioral and tax-related factors can influence an investor's decision on whether to lock in a capital loss. That is to say, sometimes selling stocks at a loss makes sense, and other times it does not. Here are some expert tips on when to sell stocks at a loss:

• Don't succumb to emotions or make rash decisions.
• Assess whether the fundamentals have changed.
• Look for tax-loss harvesting opportunities.

Don't Succumb to Emotions or Make Rash Decisions

It's easy to get heated and carried away when your portfolio is hemorrhaging money daily. However, keeping irrational emotions under control is key. Investors facing heavy losses have to walk a tightrope between "catching a falling knife" and panic-selling.

The former refers to the tendency for people to double down on a losing proposition because of the effort, time or money invested, despite current and future costs outweighing expected benefits. Panic-selling refers to people's tendency to favor loss aversion, which prompts many to overreact and take drastic action to avoid further losses instead of rationally analyzing the situation.

Charles Qi, CEO of StockPick.app, believes that the best way to mitigate those behavioral biases is by creating a "safety buffer" in advance. "Investors should examine their portfolios to determine if their equity exposures are appropriate for their current financial situations," he says. According to Qi, the best way to not panic-sell or catch a falling knife is to preemptively size your risk tolerance accordingly and not purchase stocks or risky assets beyond that level. When losses manifest, taking a step back and objectively assessing the situation based on your investment plan is key.

Ted Wozniak, head of U.S. asset management distribution at SEI Investments Co., agrees: "An investor’s investment strategy should be predicated on their time horizon and risk tolerance. Understanding specific needs and circumstances can really shape decisions around selling or holding individual stocks." He suggests using a market correction to reassess your investment plan to see if it still holds up in tough times and whether you can stick to it now and in the future.

Overall, investors should try to let go of their emotional connection to a stock pick. Doug Amis, president and CEO of Cardinal Retirement Planning, suggests asking yourself: "Would I still buy the stock today at this price?," as a rule of thumb for deciding whether to sell. "Think about the present and future, while discounting past performance," Amis says. This approach may help investors consider the objective factors behind their stock picks in a more rational manner.

Assess Whether the Fundamentals Have Changed

With this in mind, investors should avoid panic-selling solid stocks and catching a falling knife with those that aren't as sound. A good reason to sell a stock at a loss is if the underlying fundamentals behind the company have significantly deteriorated.

History is filled with once-great leading companies, considered the bluest of blue-chip stocks, falling from grace after their management, revenues, margins, earnings or strategies took a turn for the worse. "There are many examples of this in the last 20 years such as Blackberry and Intel," says Josh Simpson, vice president of operations at Lake Advisory Group. "Investors should stay up to date with their stock picks and not blindly trust in the staying power of blue-chip, large-cap companies," he says.

Simpson further advises that investors pay close attention to a company's forward guidance, especially in terms of dividends. "Anytime you read that a company is cutting their dividend or discontinuing their dividend, that is a sign that things are not going well," he says. Robert Johnson, professor of finance at Creighton University's Heider College of Business, agrees: "Companies are loathe to ever cut dividends, as that sends a very negative signal to market participants. When a company cuts a dividend that is a strong signal to the market that the firm is experiencing financial difficulties, like with General Electric Co. (GE) in 2017."

Johnson also recommends that investors pay attention to their fundamental case for owning a stock and assess if the intrinsic value of the company has markedly shifted due to negative changes in strategy, competition or management. "For instance, a drug company could have an unsuccessful trial for a widely anticipated drug, resulting in a downward revision of future revenue and earnings," Johnson says. This would be an appropriate trigger to sell as the thesis for owning that stock has changed and the future outlook is no longer positive.

Look for Tax-Loss Harvesting Opportunities

If your stocks are held in a taxable account, a good tactic might be tax-loss harvesting. To recap, when investors sell a stock for a profit, they must pay federal capital gains tax, which has two rates: long-term if you held the stock for at least a year and a day (0%, 15% or 20% based on your tax bracket) and short-term if you held the stock for any time period less than that. Short-term capital gains are taxed at one's ordinary income tax rate, up to 37%.

The opposite is also true. If you sell a stock for a capital loss, you can claim a tax credit to offset future gains. There are some rules around this though. Firstly, the IRS requires that gains be offset by the corresponding type of loss. That is, short-term losses can only be applied to short-term gains, and long-term losses to long-term gains.

Brett Bernstein, CEO & co-founder of XML Financial Group, also cautions investors to be aware of the so-called wash-sale rule. "When you sell a security at a loss, you cannot repurchase or purchase one that is substantially identical to replace it within 30 days before the sale and 30 days after it's complete," he says. This can be disadvantageous to investors who have to sit on the sidelines in cash and miss a potential rebound.

To get around the wash-sale rule and the IRS' definition of a "substantially identical" security, Ann Guntli, partner and portfolio manager at RMB Capital, recommends "buying a placeholder security." For stocks, this could mean a competitor in the same industry or sector with a high correlation. An example might be substituting Advanced Micro Devices Inc. (AMD) for Nvidia Corp. (NVDA), or Visa Inc. (V) for Mastercard Inc. (MA).

Keep in mind that the above examples are hypothetical. To determine whether two exchange-traded funds qualify as "substantially identical," and whether or not a transaction violates the wash-sale rule, investors should consult a financial planner, tax attorney or accountant."

MY COMMENT

This is a good time to evaluate your strategy and holdings. Personally I have nothing to sell. But if I did.....I would immediately reinvest the proceeds in something else. Even in the current environment I want to stay fully invested. I wold be happy to put money into any of my holdings at these cheap prices.

This is a strange example of how this thread works. I posted the little post above this one and than within about 30 seconds ran into the article in this post. Neither post was planed. It just happens.

 

YEP.....we will all be gathering at Zukodany's for an entire weekend party for all STOCKAHOLICS members and lurkers.

Thanks for hosting Zukodany. I hear that Zukdany is planing one of the largest fireworks displays in the continental USA to cap things off.

 

I just looked for the first time today.

SHOCKING.....looking at ALL the accounts that I manage for myself and family.....today, so far, I have a total gain of $58.

In my own primary account I have 6 stocks down.....most slightly....and 4 stocks up. The positive stocks are.....Amazon, Costco, Home Depot, and Tesla.

 

I have not been to the site yet.....but I am hearing rumors that the location of the ZUKODANY Stockaholics 4th of July bash.....is already starting to resemble the Burning Man event.

 

A local real estate update for my area of Central Texas and my little area of 4200 homes.

We have hit a high for the year on active listings.....51. the lowest priced listing is $575,000. The highest is $4MILLION. There are 31 listings at or above $1MILLION and 20 listings below.

I am seeing a number of price reductions......and.....listings seem to be taking a bit longer before they go pending. Apparently there is enough inventory on the market.....especially over $1MILLION.....that the market is somewhat normal.

I did hear from a well respected local realtor the other day that actually the slow season here is the SUMMER. Homes tend to sell better and quicker in the FALL and SPRING. Apparently the very hot summer weather is a detriment for home selling in the summer around here. We are also beyond the traditional end of school year time when many people transfer or move. So....we might be seeing some Summer doldrums. Although the market is STILL a sellers market around here.

 

That is great news TireSmoke. Keep us posted.