The Long Term Investor

Actually this is the post that I thought was a classic......LOL.

 

GREAT open today. If it sticks we will have a very nice end of the week.

It is interesting that since July 1, 2022.....the markets have been different than the first six months of the year. Over the first six months nearly EVERY week was negative. It was a constant down market....relentless.

Since July 1....the markets have been much more NORMAL. Up and down action....but a fairly directionless market.

Is this a temporary reprieve......or......did we hit a bottom and are now lingering? We will find out in the future when we look back. I would give it about 50/50 odds either way. We may have found a bottom. Even if we are at a market bottom that does not mean that we will never test the lows in the remainder of this year.

If I had to bet my life on it.....I would say we are at a short term market bottom......the market direction is now much more neutral.....although over the rest of the year there is potential for another 10-15% drop depending on short term news events.

 

I want to shout out to Smokie. Your posts are very nice to see and contain good information. Thanks for participating. It is clear that you have a lifetime of investing experience to contribute on this board. Well done.

We have a very good group of posters on this thread.....ALL....the regulars are amazing. I learn a lot by being here......thanks to everyone.

To any lurkers that have not posted yet......feel free to participate. EVERYONE is welcome to post regardless of experience, investing style, political leanings, or anything else. The more the better for everyone.

 

I know Emmett. We have a good time on here......and you and Zukodany are a big part of it all. Appreciate you guys.

 

I like this little article on the dollar.

The 'Strong Dollar' Is Not Something You Should Worry About

https://www.realclearmarkets.com/ar..._something_you_should_worry_about_842603.html

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

"After a first-half fear fest, a new scare story has investors shivering: the Attack of the Greenback. The US dollar is up 9.0% this year against a trade-weighted basket of global currencies and 16.1% since last June. It is flirting with parity against the euro for the first time in 20 years and at 30-year highs against the yen and pound. It all sparks fears a runaway buck will torpedo US firms’ overseas profits and slam Emerging Markets. But the buck is a bogus bogeyman. Dollar doldrums are less about economics and more about pulverized sentiment—a counterintuitively bullish sign for 2022’s back half. Don’t let them spook you.

Two summers ago, a falling dollar triggered currency fears, which I told you then were false. The greenback’s decline wasn’t a harbinger of US weakness. It simply signaled early 2020’s pandemic- and lockdown-driven global rush to dollar safety was waning. From then through yearend, the S&P 500 jumped 9.1%, excluding dividends. It soared another 26.9% in 2021 while US GDP built on late 2020’s surge.

Today’s dollar rise stems largely from America’s far bigger-than-the-rest yield climb, partly from another flight to safety amid 2022’s myriad fears and heavily Fed hike-related. Dollar doomers shrieking that it undercuts US multinationals are right that a strong buck makes exports relatively more expensive for foreign buyers. With roughly 40% of S&P 500 revenue coming from abroad, that may seem scary. This is only part of the globalization equation. Most big multinationals also have vast operations outside America, too. And they source products globally. And those costs now come in now-cheaper foreign currencies, helping offset previously stated dollar headwinds. Also, virtually all big multinational firms hedge against major currency fluctuations. A strong dollar may nick their revenues, but it just isn’t that significant. Besides, lots of analysts—seeing big currency fluctuations—look past them today, citing sales in constant currency terms. They know currency swings are immaterial and fleeting—not fundamental to a business.

And, of course, if currency would impact US firms negatively, by definition it must impact non-US firms positively—another reason to always think globally first and home country second. Major nations’ stock markets are going to go the way the world market goes, whether the US does better or worse than overseas markets.

Don’t just take my word for any of this. History shows stocks have done fine when the buck was this strong—even far stronger. The last time it climbed this high against a trade-weighted basket of major currencies was the late 1990s and early 2000s. Throughout 1998 and 1999, it wiggled around current levels as the S&P soared 51.4%. A bear market struck in 2000, but not because of a strong dollar. That stemmed from the dot-com bubble bursting—as those profitless and often revenue-light firms burned through balance sheet cash while racking up deep losses with no incoming cash to replenish them, leading to so many bankruptcies. It had nothing to do with currencies. The dollar’s climb throughout most of the ensuing bear market was yet another flight to safety—not causal.

Before that, the dollar stayed above today’s levels—as much as 44% above—from May 4, 1981 through January 13, 1987. Stocks didn’t tank—they surged, with the S&P 500 climbing 98.9% over that stretch. If an even stronger dollar didn’t stop a bull market then, why would it forestall recovery now?

More broadly, dollar moves simply don’t dictate stocks’ direction. Last April, I used statistical correlations to show you this. The past year’s dollar strength hasn’t changed much of importance. Over the last two decades, US stocks’ performance against the rest of the developed world has a correlation of -0.15 with the dollar’s moves against the major currency basket. Given 1.0 signals lockstep movement and -1.0 means polar opposite, the relationship is flimsy—certainly not meaningful enough to base portfolio decisions on.

Now, a strong dollar does reduce US investors’ returns on foreign assets and vice-versa. But remember, currencies always trade in pairs. In time, short-term swings even out.

What about claims the dollar’s strength will spark another Asian financial crisis, à la 1997? Wrongheaded! Bears say Emerging Market central banks are stuck between raising rates parallel to the US or letting their currencies plunge. But the 1997 comparison is apples to aardvarks. Back then, many Asian nations defended dollar pegs with massive foreign exchange interventions but eventually discarded them. That sparked instant devaluations, jacking up their dollar-denominated debt costs just as forex reserves ran dry.

Today? Outside of Hong Kong—armed with enormous reserves—the Asian pegs are gone and forex reserves are broadly fine. Reports lament Thailand’s being most depleted so far. But through Q2, their $218 billion in forex was down just -5.5% from 2021’s end! That is a far cry from 1997’s empty EM coffers.

Strong or weak, dollar doom flares anytime broader fears perk—like now. So see currency worries differently. Look to them not for economic hints but instead as sentiment gauges. Today they tell you the Pessimism of Disbelief reigns. As I wrote here last month, that underpins every recovery from big downturns. Its presence today is a sign you should look past the widespread worry to the approaching rebound."

MY COMMENT

I dont see as much about the dollar in the media and from investors as I have at times in the past.

I definitely like the positive message of the last paragraph of this article. I believe that it is likely true.

 

Here is another message for those that are ENDURING the current negative year in the markets.

Market history teaches us the value of patience

https://www.evidenceinvestor.com/market-history-teaches-us-the-value-of-patience/

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


"With the first half of 2022 in the books, commentators have noted that this year’s -20.0% total return for the S&P 500 is the worst January-June result in more than 50 years. Painful as the first six months were, what might they tell us about the rest of the year?

History gives us both bad news and good news. Bad news first: the correlation between the past six months’ return and the next six months’ return is vanishingly small. Predictions are problematic. Exhibit 1 illustrates this for the S&P 500; results for the S&P MidCap 400® and S&P SmallCap 600 are comparable. (The data here encompass not just the first six months of the year, but every six-month period from 1995 onward.)





In general, knowing how well or poorly an index did in the past six months tells you nothing about how well or poorly it will do over the next six months.

But… with a little legerdemain, we can tease out some good news as well. The fact that returns have been above average, or below average, does not help us forecast what returns will be going forward. This means that regardless of what has already happened, the next six months’ return is best regarded as a random draw from the same distribution that generated the last six months’ return.

We can use this insight by sorting the data points in Exhibit 1 into deciles based on the last six months’ performance. Within each decile, we can measure the average monthly performance in the last six months and the next six months. The difference between the next six months and the last six months represents the improvement (or worsening) of performance by decile and is graphed in Exhibit 2.







On one level, Exhibit 2 is just a demonstration of mean reversion in action. But it also has a practical implication: if historical returns have been especially good, future returns are likely to be worse, and if historical returns have been especially bad, future returns are likely to be better. At the end of June 2022, historical results across the capitalisation range were indeed especially bad, as Exhibit 3 illustrates.




There are no guarantees, but history tells us that when returns are as bad as the first half of 2022’s have been, improvement has been much more frequent than continued decline. When returns have been especially bad, patience tends to be especially valuable."

MY COMMENT

Patience is an important asset for long term investors. I dont know how someone could be a long term investor without it. Having to sit and do nothing is extremely difficult for humans.....especially when money and ego are involved. Anyone that had the guts to sit and do nothing during the dismal first half of the year should not have any problem continuing to be STRONG over the rest of the year.

I do believe that the worst drops are behind us....even if.....the general market direction will continue to be mildly negative going forward.

 

There is some god economic news this week.....actually.

Retail sales rise more than expected in June

https://finance.yahoo.com/news/retail-sales-june-2022-123226927.html

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

"Retail sales rose 1% in June, more than expected by Wall Street economists.

Economists had forecast sales would rise 0.9% over the prior month in June after a 0.3% jump in May. Sales in May were revised down, however, to show a 0.1% drop in sales.

Following this report, however, Andrew Hunter, senior U.S. economist at Capital Economics, said this data "isn’t as good as it looks."

"Real consumption appears to have been largely stagnant last month," Hunter said.

By category, retail sales rose the most at gasoline stations amid a surge in the price of gas last month, which topped $5 a barrel nationwide for the first time in mid-June. As of Thursday, the price of gas had declined in the U.S. for 30 straight days.

Excluding gas station sales, retail sales rose 0.7% in June.

Nonstore retailers — which includes online sales — rose 2.2% in June, the strongest gain among all business categories, excluding gas stations.

Of the 13 major categories tracked by the Census Bureau's report only three — building materials, general merchandise, and health & personal care stores — saw declines last month.

"Overall, retail sales remain 18% above their pre-Covid trend, but momentum has slowed significantly from 13.7% y/y in January to 8.4% y/y in June," said Greg Daco, EY-Parthenon Chief Economist. "In inflation-adjusted terms, and retail sales are 9% above their inflation-adjusted trend, but they’re down 0.5% y/y. In other words, while consumers’ retail receipts are higher, they’re getting fewer items for their dollars than last year."

MY COMMENT

I like this data. I especially like the data on online retail sales being 18% above pre-covid. This might be an indicator of good earnings from companies like Amazon this quarter......emphasis on "might".

The economy continues to be all over the place.......we have had an ECONOMIC PSYCHOTIC BREAK. I doubt that anyone expected that the recovery from the economic shutdown would take this long and be this erratic. We are STILL nowhere near a normal economy.

 

I dont give much weight to sentiment measures.....but speaking of good news.....here you go.

Inflation expectations fall in July as consumer sentiment beats expectations

https://finance.yahoo.com/news/consumer-sentiment-july-preliminary-umich-140253345.html

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

"Consumer sentiment rose in July while inflation expectations tumbled, according to the latest data from the University of Michigan released Friday.

Preliminary data for July showed consumer sentiment rose modestly this month, to 51.1 from 50 at the end of June. Economists expected this index to come in at 50, which would match the record low seen last month.

Consumer inflation expectations also fell sharply in July, with longer term inflation expectations dropping to 2.8% from 3.1%. Inflation expectations from this report became a larger focus for investors after Federal Reserve chair Jerome Powell referenced the report during testimony with lawmakers last month.

Rising inflation expectations were, in part, what prompted the Fed to raise interest rates by 0.75% in June, the largest increase since 1994.

Following Friday's data, market pricing for an interest rate increase of 1% later this month tumbled, with traders now putting less than 30% odds on a 100 basis point increase on July 27. On Thursday morning, these odds were at one point greater than 80%.

Still, consumer outlooks expectations for the U.S. economy remain downbeat, with the consumer expectations index in this report falling to 47.3 in July, the lowest since 1980.

"Consumer sentiment was relatively unchanged, remaining near all-time lows," said Joanne Hsu, director for the University of Michigan's survey of consumers. "Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011."

"Consumers remained in agreement over the deleterious effect of prices on their personal finances," Hsu added.

"The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all-time high reached during the Great Recession. These negative views endured in the face of the recent moderation in gas prices at the pump.""

MY COMMENT

I like all the data in this survey. The downbeat consumer expectations are what you would expect and are a nice contrary indicator for the future. The nice change in inflation expectations are a nice......but not particularly relevant indicator.

I do think that this data is contributing to the rally today along with the drop in the Ten Year Treasury......and most importantly.......the strength shown in the markets in the face of some BIG negative news this week.

 

The Citigroup earnings today are also giving a nice boost to the markets today. Here is a summary of how they did.

"Earnings from Citigroup were a bright spot for investors Friday morning. The mega bank reported an 11% jump in second-quarter revenue to $19.64 billion, one day after traders mulled a set of disappointing financials from JPMorgan (JPM) and Morgan Stanley (MS). Shares of Citi gained nearly 6%.

“In a challenging macro and geopolitical environment, our team delivered solid results and we are in a strong position to weather uncertain times, given our liquidity, credit quality and reserve levels,” Citigroup Chief Executive Officer Jane Fraser said in the earnings statement."

https://finance.yahoo.com/news/stock-market-news-live-updates-july-15-2022-115142953.html

BRAVO Citigroup.

 

Bank earnings are in focus right now since they always lead earnings reporting. Here is some info on the bank earnings today.

Citigroup, Wells Fargo Surge And PNC Slides On Earnings

https://www.investors.com/news/wells-fargo-stock-earnings-miss-pnc-citi/?src=A00220

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

"Citigroup (C) led Friday morning's bank results with a positive surprise for analysts. Wells Fargo (WFC) missed second quarter estimates and PNC Financial (PNC) fell just short on revenue expectations. C stock jumped more than 6% after the opening bell. WFC stock is up about 4.5% and PNC stock is down nearly 2% in the first hour of trading.

WFC Stock Results

Wells Fargo came in well below Wall Street forecasts for earnings and revenue. WFC reported earnings of 74 cents per share, a 46% decline year over year. Revenue for the period was $17.03 billion, down from $20.27 billion in 2021. Analysts were expecting WFC earnings of 83 cents per share on $17.5 billion of revenue.

WFC's earnings included an impairment of 8 cents per share related to its affiliate VC business. Excluding the impairment, EPS was 82 cents per share, just shy of analyst estimates.

"While our net income declined in the second quarter, our underlying results reflected our improving earnings capacity with expenses declining and rising interest rates driving strong net interest income growth," CEO Charlie Scharf said. High interest rates and weaker financial markets caused VC, mortgage banking and investment banking revenue to decline, he said.

Wells Fargo set aside $580 million in loan provisions after releasing $1.26 billion in loan reserves in 2021.

Scharf says WFC should continue to benefit from rising interest rates. While he expects credit losses to increase he said, "we have yet to see any meaningful deterioration in either our consumer or commercial portfolios."

C Stock Result

Citigroup's results were a positive surprise for analysts. EPS fell to $2.19 per share, down 23% from the $2.85 recorded last year. Revenue for the quarter was $19.6 billion, up 11% year over year. Wall Street was bracing for a 41% earnings drop and only 5% revenue growth.

"In a challenging macro and geopolitical environment, our team delivered solid results and we are in a strong position to weather uncertain times, given our liquidity, credit quality and reserve levels," CEO Jane Fraser said.

Citigroup's revenue growth was driven by rising interest rates and client activity in its markets segment. C's institutional clients revenue increased 20% over the yeah to $11.4 billion. But it was partially offset by a 46% drop in investment banking revenue to $805 million.


Citigroup increased its allowance for credit losses to $400 million, compared to a release of $2.4 billion during the period last year.


PNC Stock Results

PNC Financial topped analyst earnings expectations but fell short on revenue. Earnings were $3.39 per share, up 39% over the year. Revenues were $5.12 billion, which were up 9.6%. Analysts hoped PNC would be a bright spot for the broader disappointing bank earnings. Wall Street expected EPS to jump 29% to $3.14 and revenue to grow 9% to $5.13 billion.

"PNC had a very strong second quarter," CEO Bill Demchak said in the announcement. Loan growth exceeded the bank's expectations, net interest income and interest margin increased and the company's expenses are well-managed, he says.


Provisions for credit losses were $36 million, down from $302 million in 2021. In Q1 2022, PNC released $208 million of loan reserves."

MY COMMENT

I dont do bank stocks.....ever. BUT.....if they contribute to a good Up day in the markets.....like today.....I will take it.

I am surprised that Wells Fargo stock is basically flat. I think the info below is the reason they are not being punished.....that and......low expectations.

"...we have yet to see any meaningful deterioration in either our consumer or commercial portfolios."

 

I see that at the moment....ALL....ten of my stocks are UP for the day.

PLUS.......HAPPY GOOGLE STOCK SPLIT DAY.

 

I do not invest in bonds.....ever. I am 100% stocks and funds. People that invested in bonds over the historic low rates of the past few years and now getting hammered by the FED rate increases. Many have probably lost as much as Tech stock investors if not more.

The Bond Market Selloff in Historical Perspective

https://libertystreeteconomics.newy...ond-market-selloff-in-historical-perspective/

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

"Treasury yields have risen sharply in recent months. The yield on the most recently issued ten-year note, for example, rose from 1.73 percent on March 4 to 3.48 percent on June 14, reaching its highest level since April 2011. Increasing yields result in realized or mark-to-market losses for fixed-income investors. In this post, we put these losses in historical perspective and investigate whether longer-term yield changes are better explained by expectations of higher short-term rates or by investors demanding greater compensation for holding Treasury securities.

Increase in Yields = Decrease in Returns
As yields and prices move inversely, the recent sharp rise in yields has resulted in losses to the owners of Treasury securities. The chart below shows that returns based on the ten-year, zero-coupon yield were -12.4 percent for the two-month (forty-two-day) period ending May 5. (All yields and returns in this post are nominal and hence don’t account for inflation). The decline is the largest since August 2003 (-14.6 percent), and April 1994 before that (-13.0 percent).


Recent Treasury Returns Are Highly Negative


Source: Authors’ calculations, based on data from Gurkaynak, Sack, and Wright (2006).
Note: The chart plots the rolling, cumulative, two-month (forty-two trading day) returns on a hypothetical ten-year, zero-coupon Treasury bond from August 16, 1971 to June 17, 2022.

Selloffs Defined
Because the length of a bond market selloff may be shorter or longer than two months, we adopt a flexible approach to defining selloffs. We first cumulate returns for a hypothetical ten-year, zero-coupon Treasury security from August 1971, identifying each time cumulative returns reach a maximum for the period-to-date. We then go through the data a second time, cumulating returns from the maximum-to-date. Whenever a cumulative return drops below the maximum, we say that a selloff has started. When the cumulative return later reaches a new maximum, so that the losses are recovered, we say the selloff has ended. We used a similar approach in our post looking at the 2013 selloff in historical perspective.

Our algorithm identifies forty-two selloffs in which the cumulative return for the ten-year, zero-coupon bond drops below -5 percent. The average maximum cumulative loss for such selloffs is 11.1 percent, and the worst selloff resulted in a 38.4 percent loss (for an episode between June 1980 and August 1982). The average length of a selloff of 5 percent or larger is 214 trading days (excluding the current selloff, for which the end date isn’t yet known), the minimum is 21 days (for an episode between August and September 1982), and the maximum is 722 days (for an episode between July 2016 and May 2019).

Current Selloff Largest in 40 Years
The chart below plots the selloffs, showing that the current one is the largest in 40 years, exceeding those seen in 1994, 2003, and 2013. As of publication date, the trough of the current selloff occurred on June 14, with a cumulative return of -26.9 percent, versus -14.1 percent in September 2013, -14.6 percent in August 2003, and -18.0 percent in November 1994. None of these episodes compares with the steep losses seen in the two Volcker-era selloffs of 1979-80 (-36.0 percent) and 1980-82 (-38.4 percent).


Current Selloff Is Greater than Those Seen in 1994, 2003, and 2013


Source: Authors’ calculations, based on data from Gurkaynak, Sack, and Wright (2006).
Note: The chart plots the cumulative returns on a hypothetical ten-year, zero-coupon Treasury bond during bond market selloffs, as defined in the text, between August 16, 1971 and June 17, 2022.

Pace of Selloff Comparable to Others until Recently
The next chart plots the cumulative returns of the current selloff over time, relative to the distribution of returns for all preceding selloffs over time. It shows that the current selloff tracks the median for past selloffs at a comparable stage for the first 400 days, but then diverges. The recent divergence reflects the sharp rise in yields, and decline in returns, between March 4 and June 14.


Pace of Selloff Comparable to Historical Median until Recently


Source: Authors’ calculations, based on data from Gurkaynak, Sack, and Wright (2006).
Notes: The chart compares the cumulative returns in event time for the current selloff with the distribution of cumulative returns for all selloffs (conditional on a selloff lasting that many days) between August 16, 1971 and June 17, 2022. At 450 days, the historical distribution is based on five selloffs.

Length of Selloff Longer than Most
The chart below plots the cumulative returns of the current selloff over time, relative to the selloffs in 1994, 2003, and 2013. The current selloff again diverges most notably from the others after day 400. The chart also shows that the 1994 and 2003 selloffs ended around day 400, whereas the current one was quickly worsening at that stage. In fact, of the forty-one other selloffs since 1971 with cumulative returns below -5 percent, only five have lasted 450 days, the length of the current selloff as of May 20.


Current Selloff Running Longer than 1994 and 2003 Selloffs


Source: Authors’ calculations, based on data from Gurkaynak, Sack, and Wright (2006).
Note: The chart compares the cumulative returns in event time for the current selloff with the 1994, 2003, and 2013 selloffs.

What Explains the Selloff?
What explains the current selloff? Are investors expecting higher short-term rates than just a short time ago? Or can some, or all, of the rise in yields be explained by an increase in term premia, so that investors are demanding greater compensation for the risk of holding longer-term Treasuries? To answer these questions, we use ten-year, zero-coupon term premia estimates from Adrian, Crump, and Moench (2008) and—for each selloff—cumulate the returns that can be explained by changes in the term premium alone.

Our findings, reported in the chart below, suggest that the increase in yields over the first year or so of the current selloff (starting in August 2020) can be explained by a rising term premium. That is, the cumulative returns based on the term premium alone (the red line) are of similar magnitude as the cumulative returns based on the raw yields (the blue area). In contrast, the mounting negative returns since late 2021, amidst increasing prospects of tighter monetary policy, can be explained by expectations of higher short-term rates. The finding that the term premium changed only modestly once policy started tightening in early 2022 is consistent with the evidence from past monetary tightenings reported in this 2013 post.


Higher Short-Term Rate Expectations and Term Premia Explain Current Selloff


Source: Authors’ calculations, based on data from Adrian, Crump, and Moench (2008) and Gurkaynak, Sack, and Wright (2006).
Note: The chart plots the cumulative returns on a hypothetical ten-year, zero-coupon Treasury bond during bond market selloffs against the cumulative returns during the selloff attributable to changes in term premia for the August 16, 1971 to June 17, 2022 sample period.

Selloffs Compared
We list the attributes of the ten largest bond market selloffs since 1971 in the table below. The four selloffs highlighted in this post—1994, 2003, 2013, and 2022—are ranked sixth, ninth, tenth, and third, respectively, and highlighted with shading. Most of the selloffs, including the current one, have a term premium component, albeit one that is appreciably smaller than the selloff as a whole. In contrast, the 2013 selloff stands out as having been driven entirely by changes in the term premium.


Current Selloff Is Third Largest since 1971


Source: Authors’ calculations, based on data from Adrian, Crump, and Moench (2008) and Gurkaynak, Sack, and Wright (2006).
Notes: The table reports characteristics for the ten largest bond market selloffs between August 16, 1971 and June 17, 2022. Figures in the last two columns reflect the period between the start date and the maximum selloff date. The 1994, 2003, 2013, and current selloffs are highlighted with shading.

When Might the Selloff End?
Following our definition of selloffs, the current selloff will end when cumulative returns from the start of the selloff rise back to zero. Given that the selloff recently reached a new nadir of -26.9 percent, a large decline in yields would be necessary to end the selloff anytime soon. This seems unlikely, in part given recent inflation readings and expectations of higher short-term rates among both policymakers and market participants. The selloff would also eventually end even if yields did not change, as the yield from holding Treasury securities ultimately offsets past capital losses. At the current level of interest rates (as of June 17, 2022), and assuming no further rate increases, and no rate decreases, our algorithm suggests that it would take about seven years for investors to recapture losses accrued since the start of the selloff."

MY COMMENT

Bond holders are getting killed right now. And.....things are NOT going to improve. The FED is at the very start of a sustained increase in rates. I would not want to be holding any bonds over the next 6-12 years......unless I was simply going to hold them to maturity. Even than what you are being paid in interest on any old bonds will be ridiculous.

 

Looks like you have a big project ahead of you on your new property Zukodany. Lots of money going out the door. But...in the end great profit potential once you have your rezone done.

 

DEMAND DESTRUCTION at work.

We ate at one of our semi-regular places today that we tend to go to about once every couple of months. We did not have anything fancy.....grilled chicken breast, sauteed vegetables, and a side of Alfredo sauce....just sauce. The total cost for two with tax and tip......$48.

We used to get this same meal a year ago....including tax and tip..... for about $30. The place was mostly empty and during the noon hour that we were there had a total of about 4 tables active including ours.

I believe this place has now basically priced themselves out of peoples budget considering the type of food items that they serve. I am seeing this more and more in the restaurants that we go to that have raised prices a bit too far. More realistic places are still packed.

Not a good sign for the restaurant business. I also notice that our dry cleaner.....one of the most reasonable around here.....has raised their price for dry cleaning one item to $4.70. During the pandemic it was $3.15.

 

Thank God that the government jumped on the supply chain issues about a year ago.....I would hate to see how this would be going otherwise.

Over $31 billion in trade is rail-landlocked or stuck at anchor off U.S. coasts

https://www.cnbc.com/2022/07/15/31-billion-in-trade-is-rail-landlocked-or-stuck-off-us-coasts.html

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

"Key Points

• $1.5 billion in trade is landlocked at the Ports of Long Beach and Los Angeles waiting for rail service.
• Rail dwell in San Pedro Bay is over 11 days, almost four times what it was in January 2022, and a rail strike could begin as early as Monday if the Biden administration does not step in.
• Roughly $30 billion in trade is on vessels anchored off the East Coast and West Coast, and the situation in Europe is similar.

According to MarineTraffic, approximately 460,000 twenty-foot container equivalent units (TEUs) were loaded on vessels waiting off the East Coast ports and 180,000 TEUs are stacked on vessels off the West Coast ports as of July 13.

An important component in this picture is supply chain inflation and its impact on what consumers will ultimately pay for goods.

According to data from MDS Transmodal, the nominal value of goods moved in container, measured at the global level, has grown by almost 9% between 2019 and 2021. But Antonella Teodoro, senior consultant at MDS Transmodal, explains that considering that the average annual increase in the previous two years was in the range of 0.7%, “it is reasonable to believe that the main cause of the increase estimated in the last two years is the escalation in freight rates.”

The approximate total value of trade stuck on the water is estimated by MDS Transmodal at roughly $30 billion.

Fears of a U.S. rail strike

On Monday, the Railway Labor Act’s 30-day cooling-off period ends and fears of a rail worker strike are growing. The Biden Administration would need to step in ahead of the deadline to prevent the railroad unions to have the ability to strike. Contract negotiations have been on and off since the contract expired in 2020.

In a letter addressed to President Biden last week, a coalition of U.S. importers urged the Biden administration to establish a Presidential Emergency Board (PEB) to help the nation’s largest railroads and rail labor groups reach a contract settlement.

“The Administration has been going through the standard process that has been used in the past when considering a PEB,” the White House said in a comment to CNBC.

The most recent U.S. rail strike in 1992 reportedly cost the U.S. economy $50 million per day, a rate which would presumably be higher in the event of a strike today.

According to logistics company Woodland Group, unions say the impasse has left trains dangerously understaffed and employees overworked, whilst the National Railway Labor Conference has offered a counter including retroactive reparations and significant pay increases.

California port pile-up

Meanwhile, the pile-up of containers bound for rail waiting at the Ports of Los Angeles and Long Beach continues to pile up.

The Port of Los Angeles informed CNBC there is a total of 19,665 rail containers that have been waiting nine days or longer, while the Port of Long Beach reported a total of 13,819 rail containers waiting the same time frame. Over 60% of all containers waiting at these ports are destined for the rail.

The approximate total value of trade inside those containers is estimated by MDS Transmodal at over $1.54 billion dollars.

“Rail containers continue to pile up in the ports in record numbers,” said Noel Hacegaba, deputy executive director of administration and operations of the Port of Long Beach. “We need those boxes to move to create more capacity and to keep the economy moving.”

These long dwelling containers clog up the port’s land capacity, inhibiting the movement of trade within the port. Land capacity at the Port of Los Angeles is at 90%. For efficient land capacity, 70-75% is the optimal goal. As a result of this increase in container volumes, vessel processing is taking more time.





German port labor battle

Wage negotiations between the German labor union and port employers reached another impasse resulting in a 48-hour strike from Thursday morning until Saturday morning.

A court-ordered “peace obligation,” according to sources, may mean no more strikes with the exception of the current strike until August 24. Although the court ruling only formally applies to the Port of Hamburg, sources say there is an assumption there will also be no strikes at the other locations during this time.

According to the CNBC Supply Chain Heat Map for Europe, the fluidity of trade is gone.





Alex Charvalias, lead of supply chain in-transit visibility at MarineTraffic said, “A worsening situation in Hamburg with close to 200,000 TEUs waiting for a berth indicates that waiting times will get higher in the coming weeks.”

Andreas Braun, Europe, Middle East, and Africa Ocean product director at Crane Worldwide Logistics, said the availability of empty containers will impact trade delivery.

“Containers are not easily available at the terminals nor at the inland depots,” said Braun. “Shipping lines are having extreme issues moving empties back on the return leg to Asia. This will worsen the availability of empties in Asia to be filled with exports,” he said.

Braun noted this is all happening before the peak season starts on the Far East westbound trade route.

“Importers in Europe have to expect delays to get their Christmas orders. For the United States, European trade is also being delayed as well,” he said.

China trade

The growing port congestion in Europe and the United States has logistics managers now looking closely at the rate of canceled or blanked sailings being announced by ocean carriers, which has trended down in recent weeks. Sailings are traditionally canceled in an effort by vessel lines to make up time and regain schedule reliability. The other reason is lack of demand. Given the still high volumes of containers moving out of China, the reason behind the more recent canceled sailings was schedule related.

According to Sea-Intelligence, ocean carrier schedule reliability is around 36.4%.

Canceled sailings limit the availability of vessel space which could push up freight prices. Currently, spot prices are lower than the long-term contract rates, something that has not happened in years.

According to the CNBC Supply Chain Heat Map for China, vessel availability is currently not a problem.

While vessel availability is strong, that could change in August if ocean carriers decide to omit certain U.S. ports in a bid to move trade at a faster pace.

Logistics managers tell CNBC they would not be surprised if this happens.

“As congestion grows on the East Coast, ports can be omitted,” said Alan Baer, CEO of OL USA."

MY COMMENT

To be fair there is nothing government can do about this. They would be better off not raising expectations.

The bad news.......this is inflation in the making. The vast majority of current inflation is caused by world wide supply chain disruptions that continue......and will continue......if not get worse.

Once again.......a direct result of the closure of the economy for Covid. Please......lets NEVER close the economy again. We have yet to see if it is even possible to get it normalized.....at all. At best it is going to take YEARS.

 

I had a great gain today. EVERY stock was in the green. I also had a minuscule beat on the SP500 by 0.02%.

I have a current year to date LOSS of (24.4%).....I continue to be stuck in my recent trading range.

 

HERE is how we ended the week.

DOW year to date (-13.90%)
DOW for the week (-0.16%)

SP500 year to date (-18.95%)
SP500 for the week (-0.93%)

NASDAQ 100 year to date (-26.57%)
NASDAQ 100 for the week (-1.17%)

NASDAQ year to date (-26.80%)
NASDAQ for the week (-1.57%)

RUSSELL year to date (-22.31%)
RUSSELL for the week (-1.41%)

It seems like this week was better than what the figures show above. I may have actually been slightly positive for the week....but I am too lazy to go back and check each day to find out. If my memory is right I was green two of the days that the SP500 was red. Not that it matters. As I mentioned year to date I am at a loss of (-24.40%). So I am right in there with what I would expect from my aggressive and concentrated portfolio.

Regardless of the averages....I think it was a very good week. The markets showed REAL strength in the face of very negative news.

TGIF......we get to mark off another week.....and we move toward the heart of earnings. We also move closer to the next FED increase.....which if it sticks at 0.75%....will probably be seen as a positive.