The Long Term Investor

I am getting in some ADVANCE POSTING since I have to jet out of here at 3:15 today....right after the close. I have a show tonight and I have to start driving at 3:15.

SO.....I will say in advance.....WELL DONE EVERYONE. We had a great day......a great week.....and a great month. There is a visible light at the end of the tunnel.....no matter how long the tunnel is.

I LOVE IT when the markets take pity on me and......SHOW ME THE MONEY.

 

I kicked ass today in my accounts. I was solid green in all stocks. PLUS......I got in a great beat on the SP500 by 1.42%. I basically doubled the return of the SP500 today.

 

A KILLER week.

DOW year to date (-9.59%)
DOW for the week +2.97%

SP500 year to date (-13.34%)
SP500 for the week +4.26%

NASDAQ 100 year to date (-20.66%)
NASDAQ 100 for the week +4.45%

NASDAQ year to date (-20.80%)
NASDAQ for the week +4.70%

RUSSELL year to date (-16.04%)
RUSSELL for the week +4.34%

We are on the verge of ALL the averages falling out of correction mode. I am out of here.....have a great weekend everyone.

 

RG is back. Good to see you back RG.....that is a pretty cool vintage map/chart from 18oo's.

 

The JOB market is great?

Amazon Shrinks Staff by 100,000, Joining Netflix and Google in Hiring Slowdown

https://finance.yahoo.com/news/microsoft-google-latest-tech-giants-232957843.html

MY COMMENT

I DONT believe the "stuff" being said about the hot jobs market. Amazon alone just cut 100,000 jobs. This article is a HUGE run down of companies that are cutting jobs and hiring. Just the job cuts and hiring freezes in this article total hundreds of thousands of good jobs.

 

The SP500 is always a great option.....RG. Sounds like you are doing a good job of educating your daughters.

 

We have a relatively clean week coming up this week. We are past the FED, the GDP and much of the BIG CAP tech earnings. Now....no doubt.....we will have a week filled with commentary, opinion, analysis, speculation and gossip about what all the events of the last week mean. It will be a media field day.......and....no doubt much fear mongering as usual.

For me.....I will simply hold the line.....as a long term investor.

LOL....here is exactly the type of article I am talking about:

What if the markets are misreading the Fed

https://finance.yahoo.com/news/what-if-the-markets-are-misreading-the-fed-141108392.html

MY COMMENT

Read it if you wish....it is nothing more than speculative blather. Typical....following a week in which most of the financial media and their predictions were shown to be wrong.

 

Here is a little view of the coming week.

Stock market rally in focus after best month since 2020: What to know this week

https://finance.yahoo.com/news/stock-market-week-ahead-preview-august-1-181152131.html

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

"August begins with investors looking to build on gains following the best month for U.S. equity markets since late 2020.

In the week ahead, the July jobs report and a continued flood of corporate results will remain top of mind for investors.

Friday's employment data is expected to show nonfarm payrolls grew by 250,000 in July, while another 150 companies in the S&P 500 are set to report quarterly results in the coming week. Roughly 56% of names in the index have unveiled figures so far.

U.S. stocks finished off their best month since November 2020 on Friday, as markets rallied in each of the week's final three trading sessions.

For the month of July, the S&P 500 gained 9.1%, fighting back from its worst start to a year since 1962 after the benchmark index plunged 20.6% in the first six months of 2020. The Nasdaq Composite rallied 12.3% to notch one of its best months on record, and the Dow Jones Industrial Average rose 6.7% for the month.

A sharp rebound for equities in recent weeks comes amid expectations that slowing economic growth may prompt the Federal Reserve to scale back its interest rate hiking cycle in the fall.

Last week, the advance estimate for second quarter GDP showed the economy contracted at an annualized rate of 0.9% – marking the second consecutive quarterly decline for the measure and meeting the unofficial definition of a recession.

“Even if we’re in a technical recession already, it may be wishful thinking that inflation will come down quickly enough to allow the Fed to cut rates without having a detrimental effect on the labor market and broader economy in the process,” DWS Group Head of Trading and COO George Catrambone said in a note.

“The market may want to be looking ahead to these cuts, but many companies will not be able to escape demand destruction, margin pressure, reduction in hiring and job cuts, and foreign exchange headwinds that restrictive monetary policy and an increasingly gloomy global environment will bring.”

Some better-than-expected earnings reports, particularly from heavyweights Apple (AAPL) and Amazon (AMZN), have so far kept sentiment afloat, but second quarter figures are lackluster. Among S&P 500 companies that have reported results so far for Q2, companies are reporting earnings that are only 3.1% above estimates, below the five-year average of 8.8%, according to data from FactSet Research.

Washington has been quick to point out that despite two consecutive quarters of negative GDP, the National Bureau of Economic Research (NBER) has official say over whether the U.S. economy is in a recession or not. The organization defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months."

White House Council of Economic Advisers Member Jared Bernstein emphasized on Yahoo Finance Live last week that the labor market continues to be an “important buffer” to recession.

But that buffer appears to be showing signs of weakening. Initial jobless claims held near an eight-month high at 256,000 in the week ended July 23 after the prior week’s reading was revised up by 10,000 to the highest level for first-time unemployment insurance filings since November.

And economists expect the broader employment report this week to show 250,000 new jobs were created in July, which would mark a noted decrease from the 372,000 jobs added in June.

“There are growing signs that labor market momentum is cooling from a pretty elevated level,” economists at Bank of America led by Michael Gapen said in a recent note, citing an increase in initial jobless claims and news of company layoffs.

BofA said that although data on job openings from Indeed suggest the latest data to show another solid month of job growth, “the labor market should slow quickly, soon” amid strong hiring and falling GDP creating “an unsustainable collapse in productivity.”

Federal Reserve Chair Jerome Powell said in a statement last week following the U.S. central bank’s decision to bump up interest rates another 75 basis points that the labor market is “moving back into balance” and is only at “the beginning of an adjustment” rather than weakening.

“I would say, there's some evidence that labor demand may be slowing a bit – labor supply, not so much,” Powell said. “Nonetheless, I would say some progress on demand supply getting back in alignment.”

Elsewhere on the economic calendar, investors will digest ISM manufacturing data, job openings data, and durable goods orders, among other reports. Federal Reserve Bank presidents Charles Evans, James Bullard, and Loretta Mester are also scheduled to give speeches this week as the central bank rolls out of its blackout period after last week’s policy setting meeting.

Earnings in the spotlight this week will come from Caterpillar (CAT), Block (SQ), CVS Health (CVS), Starbucks (SBUX), and Uber (UBER), among other big names."

MY COMMENT

Ramp up the speculative doom&gloom. BUT.....there is really NOTHING going on in the upcoming week. Earnings will be devoid of the BIG DOMINANT names and the economic data will be secondary stuff compared to the GED and the FED rate increase.

The worst we are looking at in the week is the blather that will come out of the various FED members that can not stay away from the media.

 

So where are we? We have the last 7 months that were distinctly negative..........an indication of clear negative direction for the rest of the year.

On the other hand.....we have the last month and the last 5-6 week being distinctly positive and we have earnings coming in at about 72% to 80% beats at a time when the expectations are and were very low.......an indicator of positive direction.

Which will it be this week.......the good.....the bad....or the ugly?

My guess.....a continuation of the wildly unpredictable market of the past few months. We might see some profit taking.....or....we might see further gains. My view.....being a long term BULL......is for another good week.

The futures are saying.....negative open....but after the past week that is to be expected.

SO......for as long as it continues to work......SHOW ME THE MONEY.

 

So....to waste some time while we are waiting for the markets on Monday.....here is a nice little article.

I spent 5 years interviewing 225 millionaires. Here are the 4 types of rich people and their top habits

https://www.cnbc.com/2022/07/31/i-s...3-money-habits-that-helped-them-get-rich.html

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


"In 2004, I set out to conduct a five-year “Rich Habits” study to explore how the world’s wealthiest people think about their money. Each of the 225 millionaires I interviewed fell into one of four categories:

1. Saver-Investors: No matter what their day job is, they make saving and investing part of their daily routine. They are constantly thinking about smart ways to grow their wealth.
2. Company Climbers: Climbers work for a large company and devote all of their time and energy to climbing the corporate ladder until they land a senior executive position — with an extremely high salary.
3. Virtuosos: They are among the best at what they do, and they’re paid a high premium for their knowledge and expertise. Formal education, such as advanced degrees (e.g., in law or medicine), is usually a requirement.
4. Dreamers: The individuals in this group are all in pursuit of a dream, such starting their own business, becoming a successful actor, musician or best-selling author. Dreamers love what they do for a living, and their passion shows up in their bank accounts.

The Saver-Investor route requires the least amount of risk — at least compared to pursuing an entrepreneurial dream or artistic passion. But 88% of the millionaires I interviewed said that saving in particular was critical to their long-term financial success.

It took the average millionaire in my study between 12 to 32 years to accumulatea net worth of anywhere from $3 million to $7 million.

Below are their three most common habits that anyone can adopt:

1. They automated, and saved 20% of net pay.

Every Saver-Investor in my study consistently saved 20% or more of their net pay, each paycheck.

Many accomplished this by automating the withdrawal of a fixed percentage of their net pay. Typically, 10% went into employer-sponsored retirement accounts and the other 10% was automatically directed into a separate savings account.

Once a month, the Saver-Investors would then transfer their accumulated 10% monthly savings into an investment account, such as a brokerage account.

Even if 20% is too steep at the moment, saving a smaller percentage consistently can still help you meet your financial goals for the future.

2. They regularly invested a portion of their savings.

Because Saver-Investors consistently invested their savings, their money compounded over time. When they started, this compound interest was not very significant. But after 10 years, they began to accumulate significant wealth. Towards the final years of their working lives, the Saver-Investors’ wealth grew to an average of $3.3 million.

The millionaires who pursued a dream and started a business (a.k.a. the Dreamer-Entrepreneurs) did not have the ability to invest their savings, particularly in the early stages of pursuing their dreams. Whatever savings they did have were used as working capital in order to fund their dream.

Interestingly, however, once most of these Dreamer-Entrepreneur achieved success in the form of available cash flow, they immediately pivoted and began to invest their earnings.

3. They were extremely frugal.

One of the common denominators for Saver-Investors, Big Company Climbers and the Virtuoso self-made millionaires in my study was being frugal.

For these millionaires, frugality began the moment they received their first paycheck. For the Dreamer-Entrepreneurs, it started the moment their dream created enough cash flow to enable them to save and invest.

Being frugal requires three things:

1. Awareness: Being aware of how you spend your money.
2. Focus on quality: Spending your money on quality products and services.
3. Bargain shopping: Spending the least amount possible by shopping around for the lowest price.

On its own, being frugal will not make you rich. It is just one piece to the “Rich Habits” puzzle, and there are many pieces. But it will allow you to save a larger amount of money. And the more you have in savings, the more money you can invest."

MY COMMENT

Very simple as usual. It is amazing how much of the advice and habits that create wealth....are so simple. It is also amazing that the vast majority of people are NOT able to follow or understand the simple concepts that allow some people to achieve life changing family wealth over their lives.

 

Here in my little area....Central Texas.....we are in the housing market doldrums.....AUGUST. The weather is HOT......school starts in about 3-4 weeks depending on your district. Most of the corporate transfers have happened. Most of the people that were waiting till the end of the school year to move got their chance in May and June.

We now have about 67 active listings.......and the market has definately slowed. BUT....the number of listings is WELL BELOW normal.

Everyone around here is suffering from the 100+ degree heat day, after day, after day,.....for weeks and weeks now. We are in for more of the same over the entire month of August and into September. It will probably be a record year for HEAT. Although this follows up on 2-4 years of milder than usual summers.

 

Siting and reading with Varney on in the background. Waiting for the markets to settle into some direction today. We started negative with the futures last night. We are now mixed at this moment with the NASDAQ positive and the DOW and SP500 slightly negative. Just a few minutes ago the DOW was positive.

So I will say the usual......It will be between the 11:00 hour and 12:30 EST.....that the markets will settle in for the day.

We have seen this start t the day many times lately....when the markets end up nicely positive. BUT....that sort of short term pattern is random and unreliable.....so we will have to wait about five and a half hours to see how it all ends up today.

 

I like this little article.

A Look at GDP’s First-Half Dip—and Beyond
Stocks are the best leading indicator, and what matters to them is ahead—not behind

https://www.fisherinvestments.com/en-us/marketminder/a-look-at-gdps-first-half-dip-and-beyond

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

"Editors’ note: The definition of a recession has become a partisan topic of late, but as political bias can lead to investing mistakes, please keep in mind MarketMinder’s GDP discussion focuses only on its potential market impact, if any."

"Q2 US GDP fell -0.9% annualized, its second quarterly decline after Q1’s -1.6% dip. Headlines feverishly debate whether this spells recession, with mostly partisan political implications that we won’t delve into—for investors, that debate is largely backward-looking. Months-old economic activity has little relevance for stocks, which we think have already dealt with the mild economic contraction and are looking ahead to what the next 3 to 30 months have in store relative to expectations.

Stocks move ahead of economic activity, and bear markets often precede recessions as stocks discount the likely decline in investment and corporate earnings. This year’s shallow (to date) bear market would be pretty consistent with a shallow recession. But whether or not one is underway is questionable. The National Bureau of Economic Research (NBER), which is the official arbiter, doesn’t define a recession as two sequential GDP contractions. Rather, it defines it as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.” Diving under the hood of Q2’s GDP report, there are reasons to question whether the US economy meets that threshold.

Exhibit 1 breaks out net exports (red columns) and inventories (yellow) by their contribution to headline growth (dark blue line). It also shows government’s contribution (light blue) and three major GDP components: consumer spending (71% of GDP), business investment (15%) and residential investment (3%) in shades of green, representing pure private sector domestic demand.

Exhibit 1: GDP Breakdown




Source: FactSet, as of 7/28/2022. GDP and components, Q3 2021 – Q2 2022.

In Q1, while trade subtracted heavily as imports (which reflect domestic demand) jumped, consumer spending and business investment were fine. In Q2, trade added to GDP—exports rose more than imports—but inventories’ big subtraction more than offset it. This could be a delayed giveback from Q4’s huge inventory surge, presuming it stays in the data. In Q1, the BEA initially reported inventories subtracted -0.84 percentage point (ppt) from headline growth. But the BEA substantially reduced that in later revisions to the tiny detraction shown in Exhibit 1. Q2’s report similarly faces several rounds of revision from here.

Regardless, inventories are always open to interpretation. A reduction could mean demand outstripped supply, or it could mean businesses had to clear a supply glut. The latter seems more likely. All last quarter, major retailers reported heavy discounting to clear inventory overhangs. It is possible Q4’s huge holiday stocking met with ongoing supply chain uncertainty in Q1 to keep reductions at bay, but as bottlenecks started to ease in Q2, managers felt more comfortable letting inventories run off.

Elsewhere, consumer spending rose 1.0% annualized, a slowdown, while fixed investment fell -3.9%, shaving -0.72 ppt off headline growth. This has many worrying the downturn is more than just temporary supply-chain-related hiccups. The investment drop, however, was almost entirely residential real estate. While it took a chunk out of GDP last quarter as new home sales stalled, residential real estate is a sliver of the total US economy. No surprise many got cold feet from rising mortgage rates, which could persist near term. But with new homes under construction hitting record levels, affordability could improve in time.

Meanwhile, business investment, usually recession’s swing factor, declined -0.1% annualized, subtracting a miniscule -0.01 ppt from headline growth. Now, flattish capital expenditures aren’t exactly a resounding economic confidence booster. Coupled with the inventory decline, it could signal businesses are getting lean and presage investment decreasing further. But we hesitate to draw that huge of a conclusion from a single-quarter’s minute dip.

So although Q2 was mixed, does it constitute a recession? NBER’s eight-member business cycle dating committee will officially decide, but it will only be in hindsight—and likely far into the rear view by the time it does. In the meantime, others are free to choose their narratives.

For forward-looking markets, though, recession calls are of little relevance. We don’t think it is very helpful to get caught up in after-the-fact refereeing when stocks have long since moved on. GDP reports are a backward look at what markets have already anticipated. Declaring a recession based on them—or any other measure—is even more backward looking.

Whatever you want to dub it, a greater than -20% decline from January’s highs through mid-June suggests a substantial amount of economic weakness is reflected in stocks already. What matters from here is how things go relative to expectations. A deep, lasting recession could mean stocks have more negativity ahead. But, while possible, it isn’t necessarily probable. The 10-year to 3-month Treasury yield curve—a key leading economic indicator—remains positively sloped, and even if the Fed continues hiking and it inverts, that isn’t necessarily a trigger or harbinger. This is because banks’ deposit rates—their funding costs for new loans—remain close to zero, keeping new lending profitable with long-term rates higher than 10-year Treasury yields. Moreover, while it is backward-looking relative to the yield curve, through mid-July, loan growth has accelerated to 10.5% y/y, its highest rate in over a decade (excluding pandemic lockdown emergency lending), which isn’t what you typically see in or entering recession.[ii]

In any event, remember stocks are a leading economic indicator, too. They can be volatile—as the economist Paul Samuelson once observed, “the stock market has predicted nine out of the last five recessions.” But more often than not, as Exhibit 2 illustrates, the market will turn higher well before GDP does. (Note the exception in 2002: Stocks’ ultimate low came long after the recession ended as heavy-handed Sarbanes-Oxley financial regulations slammed them anew.) So nothing in stocks’ upturn since June 16 is inconsistent with the US enduring a shallow recession. It may be, though we can’t know for sure, that stocks are moving on to pricing in an economic recovery ahead.

Exhibit 2: Stocks Usually Trough Before GDP




Source: FactSet and NBER, as of 7/28/2022. S&P 500 price index, 1/1/1947 – 7/28/2022, NBER business cycle trough dates and GDP, Q1 1947 – Q2 2022."

MY COMMENT

I ALSO believe that the market action of the past 4-5 weeks is a forward indicator of the end of the market dip. Stocks are telling us the future. BUT....that future may still be a good ways off. The BIG CAP monster stocks of companies that are the best in the world at what they do....will reflect the recovery sooner that more risky or less successful company stocks. My view is that we are starting to see that with the reaction to earnings right now.

What we are seeing now is the VERY EARLY GAINS in the BIG CAP market leading stocks that I want to capture. That is why I stay invested all the time. I dont want to bail on the markets and than miss the initial 10-15% of gains before I realize what is going on and get back into the markets. The price I pay for this sort of strategy is having to ENDURE the bad times with account losses. BUT....over the longer term.....with the TOTAL gains that I capture, the impact of compounding, and the general market direction being positive.....I come out ahead.

 

NOTHING going on today. I am seeing stories speculating about the month of August after the great July that just ended.

I am also starting to see some stories about the opinions of various FED people. Just as expected. It is just going to be one of those weeks this week where gossip, speculation and BS masquerade as news. The question will be.....do the markets spend the week focused on FACT and REALITY.....or.....do the markets give in to the short term headline trading and manipulation?

We are seeing a bit of an answer in the markets right now......The DOW.......the SP500.....and the NASDAQ....are now all green.

Looking at the clock.....we are right on schedule for the EAST COAST 11:00 to 12:00 market reality check. Or......I like to call it the start to the EAST COAST lunch hour.

 

Speaking of early indicators of the dip being over.

Treasury yields fall to start August on signs that inflation may be cooling

https://www.cnbc.com/2022/08/01/treasury-yields-climb-as-investors-weigh-recession-prospects.html

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

"U.S. Treasury yields fell on Monday after a few key reports signaled that high inflation may be cooling off.

At around 10:45 am ET, the yield on the benchmark 10 year treasury notewas down 53 basis points to 2.589%. The 30-year yield slipped four basis points to 2.934%. Yields are inverse to price and a basis point is one-hundredth of a percent.

The 2-year yield also fell slightly to 2.89%, meaning the closely watched 2-year/10-year yield curve remains inverted, a situation often interpreted as a sign of impending recession.

The dip in bonds came after the ISM manufacturing report for July showed an a sharper-than-expected decline in prices paid. The measure can be seen as a sign that inflation could decline in the coming months.

“As demand slows and supply bottlenecks improve, we should expect a corresponding slowdown in inflation during the back half of this year. The Fed will likely respond with smaller rate increases in the coming meetings,” LPL Financial chief economist Jeffrey Roach said in a note.

Wall Street is coming off its strongest month since 2020 as longer-term interest rates moderated slightly and investors found a relief rally after months of deepening pessimism, with corporate earnings offering some reprieve.

The big data point this week will be Friday’s nonfarm payrolls report from the Bureau of Labor Statistics, which will give more insight into the strong labor market.

So far this year, the solid growth of jobs has prompted economists to say the United States is currently not in a recession, even with two consecutive quarters of GDP contraction."

MY COMMENT

YES......this is based on the "thing".......the restoration of the supply chain.....that might be the REAL key to inflation. AND.....this may be an early indicator that inflation may ACTUALLY be....."TRANSITORY".

Personally I would consider inflation that only lasts a year or two as transitory. Especially compared to the many, many years that we saw massive inflation back in the 1970's and 1980's.

We just need to avoid everyone FREAKING OUT and causing more damage to the economy trying to CURE IT....rather than going slowly and allowing.......whatever the conditions of the economy are......to settle out from the impact of the economic shut-down. One thing is CLEAR from history....trying to manipulate the economy......is always a failure and a disaster.

As I have said many times.....I do believe that we need to normalize interest rates.....but......the FED should do so slowly and error on the side of being too conservative. They dont need to FREAK OUT and grab the economy by the throat and put it into a COMA.

NOT that i want inflation to go away too soon.....I want my nice big Social Security cost of living raise to happen. I want my share of the FREE MONEY......after all.....we deserve it.