The Long Term Investor

In my little LOCAL real estate world of about 4200 homes.....I saw some data today. I am talking about upscale, suburban, Central Texas.

Here is how we are looking in my area:

Median Sales Price, $1.1MILLION a year ago this was $838,000.

Median price per sq ft has gone to $346 from $272 a year ago.

Homes are not selling in one day.....it is now about 15 days on average.

In my local area in the first six months of the year 153 homes sold.

There has been a good increase in inventory....NOW there is about 2.5 months of inventory.

In my area last year at this time there were 22 active listings....now there are about 70.

We are STILL in a clear SELLERS MARKET.

 

Siting and waiting for the markets to establish direction today. What I am seeing so far:

The TEN YEAR Treasury yield is way down to 2.795%. It is amazing that it seems to linger in spite of the rate increases.

The NASDAQ is obviously being hindered by the SNAP earnings. A totally irrelevant event coming from an irrelevant company.

We have had an amazing run UP this week. Some times the markets just have to pause and digest this sort of gain. This is especially true in the current environment........which I STILL see as generally negative.

We will know more about 11:00 to 12:00 East coast time.....which seems to be the usual time that the markets settle in one way or another. At least the DOW is positive and the SP500 is a hair away from positive. I would not be surprised if the SP500 turns positive in the next 5-10 minutes. The question is can it stay there all day.....or will short term traders take their gains and bail for the weekend.

At the minimum this week was nice for building up some cushion for the next market drop.

 

I like this little article.

How to invest like Warren Buffett during a recession

https://www.cnn.com/2022/07/21/investing/buffett-investing-recession/index.html

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

"New York (CNN Business) Between 2020 and 2022, stocks shot toward the moon. This year, they've been jettisoned back to Earth.

The S&P 500 (INX)is down about 18% year-to-date, inflation rates are at 40-year highs, geopolitical chaos abounds and a recession is looming. The easy-money environment that many investors grew accustomed to over the past 13 years is in the rear view mirror.

Risky meme stock, SPAC and NFT bets have dried up, giving value stocks, with more stable near-term cash flows, the upper hand in today's fear-driven market.

The S&P 500 Growth Index, which tracks stocks that have the best three-year growth in revenue and earnings per share, has fallen nearly 15% in the past year. The S&P 500 Value Index, which tracks stocks with the best valuations, dropped by just 4.8% over the same period.

"Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism," Warren Buffett warned investors at his annual Berkshire Hathaway shareholder meeting in April. "They don't make money unless people do things, and they get a piece of them. They make a lot more money when people are gambling than when they are investing."

The difference between gambling and investing, says the Oracle of Omaha, lies in understanding a company's fundamentals.

Technical analysis is based largely on stock price and volume. Traders aren't trying to predict the future of a company. They don't look at the underlying business or the economy but instead use charts and identify patterns to predict where a stock is going.

Fundamental analysis occurs when an investor evaluates a company's financial position, performance, competition and the economy to determine its value, then purchases that stock when it's trading at a discount.

The casino is open

About 15% of all current US stock market investors say they began investing in 2020, according to a Schwab survey — and the majority who opened their first non-retirement investment account that year were under the age of 45 and had lower incomes than more seasoned investors.

Bolstered by an influx of pandemic stimulus money, about 20 million new investors poured their extra cash into the US stock market over the past two years, using Reddit and other online communities to promote narratives that sent shares of companies like GameStop soaring 100 times in price over a few months.

These stock rallies were largely based on technicals — a coordinated short squeeze — and not on whether companies were viable in the long-term. That indiscriminate buying helped turn Wall Street into a "gambling parlor," Buffett said at his company's April meeting.

Technical analysis is useful for short-term trading and for timing markets, while fundamental analysis is useful for long-term investing, which is less susceptible to the whims of the economy.

Over the long run, equities tend to outperform inflation and recover from downturns by a wide margin, but it's a marathon — not a sprint. Buffett is known to say that his favorite stock holding period is forever.

Fundamental analysis doesn't tell investors much about what will happen in the immediate future, but when it's time to hunker down and get through the hard times, fundamental investing is the way to go, analysts say.

Trust yourself

Investors aren't very good at predicting the future, said Steven Check, who runs the financial advisory firm Check Capital. They tend to overreact to immediate problems. "The market is irrational in the short term, but it's always rational in the long term," Check said. Bubbles grow and burst but if you consider how a business will do over the next decade and then stick with it "you'll eventually end up being rewarded," he said.

"The stock market is the only store where when things go on sale, everyone runs out the door. You don't want to be one of those people," added Shawn Cruz, head trading strategist at TD Ameritrade. It's likely that companies with strong balance sheets, healthy cash balances and growing revenues are currently priced at a discount, he said. "So if you have a long term focus and some specific names you're looking at, this is a good time to pick up some quality shares for your portfolio."

You don't have to be a stock picking guru, he added. Companies like Chase, Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) are still trading below their recent highs.

Do the homework

The good news for the lazier (ahem, busier) investors amongst us: Plenty of experts have already done the research for you and — for a small fee — you can gain easy access to it. But if you're going by Buffett's rules, it's important to do the work yourself and never invest in a business you don't understand.

A good place to start is by reading up on a prospective company. Look at who's managing the business, what it's promoting and how. Do you understand the product and do you think it has a place in the future economy? Ask yourself if you'd rebuild this company from scratch if given the change, Check said.

Next, take a look at the company's financial statements, which are typically available on their websites. Evaluate their balance sheet. Do their profit-loss statements, cash flow statements, operating cost, revenue and expenses seem healthy? Has net profit been increasing over the past few years? Does the company's debt seem outlandish?

You'll also want to take a look at the broader economy and see how a company stacks up against its competitors You want to invest in businesses that stand out and have room for growth, especially in a crowded sector.

Finally, keep up to date. Your investment in a company doesn't end when a trade goes through. The economy evolves and your portfolio should as well.

Most importantly, don't be afraid to stop actively investing. "In my view, for most people, the best thing to do is owning the S&P 500 index fund," said Buffett at his 2020 shareholder meeting. "There are huge amounts of money people pay for advice they really don't need.""

MY COMMENT

This short little article is a total investing primer. Here is all the key concepts for long term investing.....including the last paragraph about the SP500.

I never hear many young or new investors talk about financials. I never hear many of them talk about financial statements. In hindsight one of the best classes that I took in college was ACCOUNTING. Much of the business classes that I took were focused on MARKETING.......but......knowing the basics of the various financial documents that are produced by every company is a God-send for an investor.

In the old days you had to do all the work to crunch accounting data by hand. Now......much if not all of that work......is available FREE online. All you have to do is search for it and read it. Of course your investing education should include some basic accounting education.....which you can do yourself......as usual.....on the internet.

 

I was seeing a good number of articles about the yield curve a few weeks ago.......so:

Our July Fed Meeting Preview
The yield curve has flattened lately. What next?

https://www.fisherinvestments.com/en-us/marketminder/our-july-fed-meeting-preview

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

"The next Fed meeting is less than a week away, and most analysts are penciling in another steep rate hike. Almost no one expects this to do anything about inflation, given the Fed can’t refine petroleum into gasoline, increase the grain harvest, staff airlines or unload container ships, all of which have fueled accelerating inflation even as money supply has started rolling over. But there is mounting fear that even one more big rate hike could be overshooting and kneecapping the economy, especially given how much the yield curve has flattened in recent weeks. In our view, there is some risk of the yield curve inverting, but it isn’t a given—and even a mild inversion isn’t an automatic recession trigger.

Now, when we look at the yield curve, we don’t use the 2-to-10 year segment that gets most pundits’ attention of late. We think the yield curve’s importance comes from its relationship with banks’ funding costs (short-term rates) and loan revenues (long-term rates), with the spread between them influencing banks’ potential profit margins on new loans—which drives loan growth. Generally, a wide spread means big profits and aggressive lending, while a deeply negative spread can signal a credit crunch. Banks don’t get much funding through 2-year CDs. They fund primarily through retail deposits and interbank markets, which are much shorter-term. We think the 3-month Treasury yield is a better approximation, so we use the 3-month to 10-year yield spread. That spread, as Exhibit 1 shows, has narrowed sharply since early May, from over two full percentage points (a multiyear high) to roughly half a point as of Tuesday’s close.

Exhibit 1: The Rapidly Shrinking Yield Curve Spread



Source: FactSet, as of 7/20/2022. 10-year and 3-month constant maturity US Treasury yields, 12/31/2014 – 7/19/2022.

The flattening has come largely at the short end of the curve. The 10-year yield is down just 0.11 percentage point since the spread peaked, albeit with some big volatility along the way—it closed May 6 at 3.12%, spiked to 3.49% on June 14 and closed Tuesday at 3.01%. Meanwhile, 3-month yields have jumped from 0.85% on May 6 to 2.52% now.[ii]

Incidentally, 2.5% is where the upper bound of the fed-funds target range would be if the Fed were to make a 0.75 percentage point rate hike next week—a strong indication that the move is already priced in. It would be very strange if it weren’t, given how much chatter there has been. Markets are efficient, and they are highly likely to reflect commonplace opinions about what may happen in the near future. Plus, as Exhibit 2 shows, 3-month yields have had a strong tendency to move ahead of the Fed.

Exhibit 2: The Prescient 3-Month Treasury Yield



Source: FactSet, as of 7/20/2022. Fed-funds target rate upper bound and 3-month constant maturity US Treasury yield, 12/31/2014 – 7/19/2022.

So it is far from certain that one big rate hike will be enough to invert the curve next week. It is possible, if expectations for more hikes mount—or if inflation expectations drop. But not automatic.

Still, it is worth considering what a shallow inversion would mean—and we see two big reasons it wouldn’t be a recession trigger. For one, note that we said earlier the yield curve influences banks’ costs and revenues—we didn’t say they were identical. The yield curve merely points to potential changes in the banking world. These days, the signal isn’t that strong. Frustratingly, the average national deposit rate, according to the FDIC, is 0.10% thanks to an astronomical deposit glut.[iii] Meanwhile, the prime loan rate is 4.75% and the average 30-year fixed mortgage rate is 5.5%.[iv] These numbers aren’t consistent with a credit crunch that would force businesses to get lean and mean to survive a funding freeze.

Two, money doesn’t care about borders. Banks can borrow in one country, lend in another and hedge for currency risk with minimal hassle, arbitraging rate differences globally. The US has some of the developed world’s highest rates right now, making it very attractive to borrow cheaper in Continental Europe or Japan and lend here. This is a big reason why the dollar has strengthened this year—all else equal, money flocks to the highest-yielding asset. If global money supply contracted sharply, limiting the amount of money able to flock here to take advantage of higher rates, then that would be one thing. But central banks outside the US aren’t mopping up reserves to a great degree. Nor is the global GDP-weighted yield curve flirting with a meaningful inversion.

Finally, it is worth noting that the yield curve isn’t a trigger. It is true that the yield curve often inverts before recessions, but the lag is quite variable. Bear markets often precede recessions, too, so even if the yield curve is indicating a recession, how much of that weakness is already reflected in stocks? Probably quite a lot, in our view, given the ubiquitous headlines exploring the concept.

We aren’t calling the yield curve meaningless. A deep US inversion with parallel moves globally would be cause for concern. But we aren’t there yet, and there isn’t a high probability it is imminent. So while we may get a shallow recession due to all this year’s supply disruptions, the likelihood that spirals due to a Fed-induced credit crunch seems remote for now."

MY COMMENT

This type of data might be interesting to s small number of people. But as a long term investor......irrelevant to me. I simply dont invest on economic data......or events.

Economic data in general is the type of "STUFF" that you often hear investors in real life and on TV talking about. the best course to me is to simply ignore it all. It is meaningless and does nothing but add irrelevant complexity to investing.

 

This is a pretty good article to follow the post above and my comments above.

A key point being lost amid fears of an economic slowdown: Morning Brief

https://finance.yahoo.com/news/morning-brief-july-2022-100058144.html

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

"Earnings season is underway and investors are keen on getting the same insight from every public company out there: Are we heading into recession?

Some companies will say yes. Others are less certain.

In any case, there is no doubt the broader economic environment can be blamed for all manner of business challenges. For instance, a slowdown in soap and candle sales.

But often lost in these "here-and-now" discussions of the economic environment is what we're exiting: A period of unprecedented fiscal stimulus and financial speculation which warped expectations about both financial markets and the broader economy.

And a recent report on layoffs from crypto company Blockchain.com reminded us of this crucial context.

On Thursday, CoinDesk reported that Blockchain.com would lay off 25% of its staff. That would add Blockchain.com to the list of crypto firms including Coinbase (COIN), Gemini, and OpenSea that have announced staff reductions in recent weeks.

But in its story, CoinDesk noted Blockchain.com's cuts would return its staffing levels to those seen at the beginning of this year — and this after cutting a quarter of its workforce.

For those employees now out of work in an industry that is mid-process in a rapid contraction of optimism and enthusiasm, this is little consolation. As The Information's Kate Clark tweeted the other day, there have now been over 53,000 startup employees laid off so far this year.

Companies resetting themselves back to the staffing or investment levels that were appropriate just 8 months ago isn't quite a recession. It's more like a reset.

Notably, "reset" is the word Fed chair Jay Powell used back in June when talking about current pressures in the housing market. And as a report from Redfin published Thursday showed, those pressures continue to build apace.

Earlier this week, we argued the signal from corporate hiring announcements was not necessarily recessionary but certainly cautionary.

Basically, the world most management teams planned for in 2022 has not come to pass. And given the surprises facing businesses amid a rapid rise in interest rates, companies are just trying to adjust to the present rather than signaling something about the future with the recent spate of hiring and investment announcements.
A few weeks back, Yahoo Finance Editor-in-Chief Andy Serwer wrote that it seems just about everywhere you turn, we're asking if things will go back to the way they were in February 2020. And this is not just a business question: Harry Styles asks the same in his recent hit single.

Anywhere it seems you turn in the culture, there is uncertainty about the past's role to shape our coming present. In the end, the answer to these questions will most likely be an unsatisfying "maybe."

But as we continue to see slowdowns in the labor market, the housing market, and the stock market, it is worth remembering that we're still just working off the excess of a frenetic period in economic history.

Corporate earnings, announcements, mergers, layoffs, and the like are all so closely tracked by investors because of what they say about the future. Investing is, after all, about estimating the present value of discounted future cash flows — so don't tell me what you make, tell me what you're going to make.

Today's economic situation, however, asks investors and leaders to have a bit less foresight and a bit more gumption.

Act now so you make it to a tomorrow.

And let tomorrow's challenges be handled then."

"What to Watch Today
Economic calendar

• 9:45 a.m. ET: S&P Global U.S. Manufacturing PMI, July preliminary (51.8 expected, 52.7 during prior month)
  
  
• 9:45 a.m. ET: S&P Global U.S. Global Services PMI, July preliminary (52.4 expected, 52.7 during prior month)
  
  
• 9:45 a.m. ET: S&P Global U.S. Composite PMI, July preliminary (52.3 during prior month)
  

Earnings
Pre-market

• Twitter (TWTR), American Express (AXP), Verizon Communications (VZ), HCA Healthcare (HCA), Schlumberger (SLB), Regions Financial (RF), Cleveland-Cliffs (CLF)
  

Post-market

• No notable reports scheduled for release."

MY COMMENT

Investor foresight? An impossibility....other than what you can see in fundamentals. The KEY single word in this little commentary is GUMPTION.

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

 

Yeah Smokie. I have seen that article and data all over the place lately. It usually triggers me to post something about companies CUTTING JOBS. I sure hope people are not using that sort of BALONEY to justify job hopping. That type of survey is totally worthless. Just more media GARBAGE.

 

I see that the DOW is now negative. So....the markets have solidified on the down side as we near noon on the East coast.

So......today will "probably" end up as a consolidation day after the big gains earlier in the week.

 

I have two words for the short term market today......TYPICAL and MORONIC. It is absolutely MORONIC that Tech companies are being driven down today due to the SNAP earnings. Here you have a FAILING and IRRELEVANT company being used as a barometer for the entire tech space.

As I saw in one article:

"The fallout from Snap's (SNAP) disastrous fourth quarter earnings report was weighing on tech stocks to finish the week, dragging down peers across the digital ad space.
Shares of Snap were off as much as 38% in afternoon trade."

Probably traders and trading platforms (AI) at work manipulating the short term markets by how their programs and algorithms are set up. That is my personal view at least. The short term markets are really DUMB.......and.....no place for any actual investor. Simply the jungle for speculators and gamblers.....unless you have enough power, contacts, and money to manipulate things to your advantage.

 

I heard the shills for the government out today talking about how even if the GDP number is negative that does not mean that we are in a recession. One of two things is happening:

1. They already know the figures are going to be negative and they are laying the groundwork for their announcement that even though we just had two down quarters.....it is still not a recession. So in other words....the FIX IS IN.....with the body that calls recessions.

OR

2. They are TALKING UP number one above.....so that even a small positive in GDP can be argued as a great victory.

The rest of us will get the GDP numbers next Friday.

 

A typical DOWN day for me today. I was medium level in the red. I also got beat by the SP500 by 0.59%.

I did have four stocks UP today.....that is the good news of the day for me......they were COST, HD, HON, and TSLA.

 

All in all a GREAT week this week. We made really ice gains across all the averages for the week.

DOW year to date (-12.22%)
DOW for the week +1.95%

SP500 year to date (-16.88%)
SP500 for the week +2.55%

NASDAQ 100 year to date (-24.04%)
NASDAQ 100 for the week +3.45%

NASDAQ year to date (-24.36%)
NASDAQ for the week +3.33%

RUSSELL year to date (-19.53%)
RUSSELL for the week +3.58%

These are nice HEFTY gains for a one week time span. If we can manage to get good earnings and string together a few weeks like this we will make some real progress. Week by week we move forward into the long term future.

Have a great weekend everyone.....I am off to a show which will happen this evening. At least I will make money tonight even though I lost in the markets today.

 

Yeah Smokie.....I dont see any future for SNAP. But that is just me.....if you happen to own it you probably know more about it than I do and you will just have to make your own decisions about the company.

 

For anyone wanting to read a bit about SNAP.....here you go.

Snap 'is going through a near-death experience,' analyst explains

https://finance.yahoo.com/news/snap-is-going-through-a-near-death-experience-analyst-170628497.html

The media focus on this company at the moment is ASININE.