OK, happy for this red day. A Green Day would make no sense. Big Tech should be in the green next week.
ANOTHER....great week this week. I know I was in the green nicely for the week......but I dont know how much since I do not keep weekly data and am too lazy to go back and calculate it. ALL the averages were GREEN except for the DOW. We are making really good progress. DOW year to date (-9.73%) DOW for the week (-0.13%) SP500 year to date (-13.03%) SP500 for the week +0.36% NASDAQ 100 year to date (-19.07%) NASDAQ 100 for the week +2.01% NASDAQ year to date (-19.10%) NASDAQ for the week +2.15% RUSSELL year to date (-14.41%) RUSSELL for the week +1.94%
ANOTHER nice positive week for me in the can. My cushion continues to grow for when the next step DOWN happens. I am hoping that I hit my low of the year about 6-7 weeks ago and will NOT revisit it. I have a really good streak going over the past 7 weeks. Here is a really good illustration of the progress we are making. I BET that many will be surprized by some of this data....for the SP500: 3 days +1.32% 5 days +0.36% 1 month +8.19% 3 months +0.53% 6 months (-7.9%) YTD (-13.03%) So we are now POSITIVE for the SP500 from THREE DAYS to THREE MONTHS. AND....at six months we are ONLY at a loss of (-7.9%). This really illustrates the impact of the early days of this year on YTD returns. I would bet that if you interviewed a whole bunch of investors nearly ZERO would guess that the past THREE MONTHS have been positive for the SP500.
OK Smokie.....what I want to know regarding post 11855 is......where is MY free money? It is not fair (stomping my feet).
No kidding. Maybe if we both throw a fit we will get double the money. You are anticipating that SS raise and will forget about it by then.
Tesla split date. Tesla sets Aug 25 as trading day for three-for-one split shares https://finance.yahoo.com/news/tesla-sets-aug-25-trading-211249642.html (BOLD is my opinion OR what I consider important content) "(Reuters) - Tesla Inc said on Friday trading in its three-for-one split shares will start on Aug. 25, after the electric vehicle maker's shareholders approved the proposal during its annual meeting. Shareholders of the EV maker voted for board recommendations on most issues at the company's annual meeting on Thursday, including re-electing directors, approving a stock split, while rejecting proposals focused on environment and governance. Chief Executive Elon Musk owns 15.6% of Tesla, according to Refinitiv data, after selling millions of shares last year. Each stockholder of record on Aug. 17 will get a dividend of two additional shares for each share held, to be distributed after close of trading on Aug. 24, the company said. The new share split comes two years after a five-for-one split helped bring down the price of the high-flying stock within the reach of ordinary investors. While a split does not affect a company's fundamentals, it could buoy the share price by making it easier for a wider range of investors to own the stock. Tesla shares, which debuted at $17 apiece in 2010, rose to more than $1,200 late year after the 2020 stock split, taking the company's market capitalization above $1 trillion. Tesla shares, which ended 6.6% lower on Friday, are down about 18% this year. At the Thursday meeting, shareholders narrowly approved an advisory proposal that would increase investors' ability to nominate directors, with 339.2 million votes for the proposal and nearly 319 million votes against it. Shareholder proposal asking Tesla to report its efforts in preventing racial discrimination and sexual harassment annually was rejected, with 350.7 million votes against it versus 310 million votes for the proposal." MY COMMENT Always nice to get more shares. This WILL allow more investors to participate in the stock and to get over the psychological barrier that is caused by a high share price. Good news and good PR for the company.
The "EXPERTS".......wrong again as usual. 75% of S&P 500 companies beat earnings expectations "The second-quarter earnings season is winding down with 87% companies having reported results. Among those firms, 75% reported a positive EPS surprise, according to FactSet. So far, the earnings growth for the S&P 500 is 6.7%. If 6.7% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since the fourth quarter of 2020, according to FactSet." https://www.cnbc.com/2022/08/04/stock-market-news-futures-open-to-close.html MY COMMENT This number......75%......positive EPS surprise.....is way above what was predicted for this earnings season. The simple lesson.....the so called "experts" are wrong once again as they usually are. Most of this "expert stuff" is simply media speculation. In other words some economist or other person making a......GUESS. It is amazing how often they are wrong....way more than you would expect with simple chance. Of course.....in typical fashion.....they are now decreasing their earnings estimates for next quarter. These people are shameless hacks. No thanks to them.....we have had a GREAT earnings season this time around. Fortunately they can predict all they want.....but.....they have ZERO real impact on the actual earnings. The lesson......this garbage is irrelevant to long term investors, and has nothing to do with stock and business analysis.
The....."creating shareholder value".....idiocy continues. Kellogg is spinning off its cereal business https://www.cnn.com/2022/06/21/busi...ond company, including Cheez-Its and Pringles. (BOLD is my opinion OR what I consider important content) New York (CNN Business) Kellogg is splitting into three different companies in a major shakeup for the 116-year-old company. The first company will include Kellogg's (K) North America cereal unit, which includes Raisin Bran and Rice Krispies, its snacking unit will become a second company, including Cheez-Its and Pringles. And, lastly, a new "pure-play plant-based foods company" will be anchored by its MorningStar Farms brand. New names for the spin-offs will be announced later, and the spinoffs are expected to be completed by the end of 2023. The board of directors has approved the plans and headquarters for the three units will remain unchanged. "Kellogg has been on a successful journey of transformation to enhance performance and increase long-term shareowner value, said Kellogg CEO Steve Cahillane in a statement. "These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities." Shares rose more than 8% in premarket trading. Its stock is up more than 4% for the year. Kellogg explained that spinning off the companies will "better position each business to unlock its full potential," especially as the company has grown with acquisitions in recent years. Further focusing the new companies will help grow them with "financial targets that best fit their own markets and opportunities." By far, the snacking business will be the largest new company. Kellogg said it raked in more than $11 billion in sales last year, and it's a "higher-growth company than today's Kellogg Company." About 60% of its sales come from Pop-Tarts, Nutri-Grain, Pringles and Cheez-It. Last year, Kellogg was embroiled in a 11-week-long strike at four cereal plants, including at company's home town of Battle Creek, Michigan. The new five-year deal includes a prohibition on any plant closings during the life of the contract and a a cost-of-living increase in pay to protect workers from rising prices. Kellogg joins a number of companies chopping themselves up to promote growth. Johnson & Johnson (JNJ), Toshiba (TOSBF) and GE (GE) announced similar plans last year. "For survival and keeping up with market trends, companies do have to look at what their most profitable lines of business are and where they should spend most of their time and focus," said Liz Young, head of investment strategy at SoFi, previously told CNN Business. "Competition is fierce. Sometimes you have to break it down to build it back up."" MY COMMENT Love it......"sometimes you have to break it down to build it back". NO.....sometimes you have to break it down so the executives and short term stockholders can benefit at the expense of the long term future of the company. I am NOT a fan of Kellogg anyway.....I dont like their company culture or their business. BUT.....this is simply more FAD type IDIOCY. Take an iconic company that has great businesses in a number of areas and break them down into little companies that are single product-line, niche businesses. This greatly decreases the potential for a company to survive based on diverse product lines and multiple income streams. This shareholder activism type activity.....simply benefits the short term to medium shareholders that have NO REAL concern for the future of the company. These are SEMI-CORPORATE-RAIDERS that are enabled by foolish short sighted management that wants to look good and often trigger HUGE bonuses for themselves. One a company gives up its position as an iconic company.....they rarely get it back.
Since it is the weekend......I saw an article a day ago about mortgage rates going back below 5%. I did not read the article....but.....I suspect there were some points involved. Good news for house hunters. Here in my little local real estate market.....we are LINGERING in the August heat. We are on track to break the all time record for summer temperatures. August is normally a slow month for real estate around here. School starts in August and the heat makes many people stay home. We now have 64 homes for sale in my little area of 4200 homes. I see a couple that are really good buys for the price. Prices seem to be staying mostly firm.....but.....houses are definately taking longer to sell. Our current inventory has lots of homes for buyers in the $600,000 to $900,000 range. the lowest home in our area is $600,000.....the highest is $8MILLION.
Here is what we have to FEAR or LOOK FORWARD TO.....this coming week. Inflation data, concerns about 'a hard landing later': What to know this week https://finance.yahoo.com/news/stock-market-week-ahead-preview-august-8-173432172.html (BOLD is my opinion OR what I consider important content) "A series of inflation reports due out this week could propel or break the market’s summer momentum. Investors will get the latest gauge of how quickly prices are rising across the U.S. economy from three releases on tap in the coming days: PPI, CPI, and unit labor costs. The readings are expected to influence how Federal Reserve officials proceed with the rate hiking cycle and will be closely monitored after Friday’s monster employment report suggested more aggressive increases may be warranted to slow the economy. The U.S. economy added 528,000 jobs in July, according to the Labor Department — a figure over twice as high as economists anticipated amid expectations job growth would recede as tighter monetary conditions and company layoffs stoked fears of a recession. Moreover, the figure marked the labor market’s full recovery to its pre-pandemic level. For investors, the report implied labor conditions remained strong enough for the Federal Reserve to keep raising interest rates. Stocks finished mixed on Friday as investors mulled the report. The tech-heavy Nasdaq fell 0.5% and the S&P 500 ticked down 0.2% while the Dow rose by 0.2%. Economists at Bank of America called the report “a double-edged sword,” implying lower recession risk but an increased risk of a hard landing later. "The July employment report was an absolute knock-out, a major upside surprise relative to my expectations and indeed much of the labor market data released up to this point,” Renaissance Macro Research Head of U.S. Economics Neil Dutta wrote in a note. “Talk of recession and a monetary policy pivot is premature.” He added that "this jobs report is consistent with an inflationary boom. The Fed has a lot more work to do and in an odd way, that the Fed needs to get more aggressive in pushing up rates, makes the hard-landing scenario more likely." The labor market’s unusual tightness has been a focal point of Fed officials, with the imbalance between job openings and available workers placing upward pressure on wages and exacerbating inflationary pressures. The labor force participation edged marginally lower last month, falling to 62.1% from 62.2% in June. Average hourly earnings, meanwhile, increased 0.5% for the month, higher than June’s upwardly revised monthly wage gains of 0.4%. On an annual basis, earnings were up 5.2%, on par with June's year-over year increase. Pantheon Macroeconomics Chief Economist Ian Shepherdson pointed out that labor force participation has stalled, with the rate for men falling markedly for reasons not yet clear. “At the same time, labor demand has softened but it is still strong, allowing wage gains to develop renewed traction,” Shepherdson wrote in a note to clients. “This, in turn, means that we will have to lift our forecast for the wage-sensitive components of the core CPI and PCE." The headline consumer price index index for July is expected to show a slight moderation on Wednesday, mainly helped by lower gas prices. The figure, however, is still expected to show inflation climbing at the highest pace in four decades. “Falling gas prices should bring some relief to July CPI inflation, though we expect core price pressures to remain firm,” Bank of America stated in a note Friday. Economists surveyed by Bloomberg forecast the broadest measure of CPI rose by 8.7% in July, a number that would mark a slight cooldown from 9.1% in June. Over the month, CPI is expected to show an increase of 0.2%, up from 1.3% last month. But the core measure of the index, which excludes volatile food and energy prices, likely accelerated to 6.2% on an annual basis, compared to 5.9% during prior month. At the wholesale level, the producer price index or PPI, which measures the change in the prices paid to U.S. producers of goods and services, is expected to have cooled. On a monthly basis, economists forecast the PPI for July rose 0.3% expected compared to 1.1% during prior month and 10.4% expected on the year versus 11.3% in June. Elsewhere in inflation releases, investors will assess readings on unit labor costs, or the sum of all wages paid to employees and results of the University of Michigan’s inflation expectations survey. On the earnings front, the reporting season is winding down, with roughly 87% of the companies in the S&P 500 having reported actual results for the second quarter year-to-date. A few more notable reports are still ahead, with earnings from names including Disney, (DIS), Coinbase (COIN), Tyson Foods (TSN), and Rivian Automotive (RIVN) on the docket." "Economic Calendar Monday: No notable reports scheduled for release. Tuesday: NFIB Small Business Optimism, July (89.5 expected, 89.5 during prior month), Nonfarm Productivity, Q2 preliminary (-4.5% expected, -7.3% during prior quarter), Unit Labor Costs, Q2 preliminary (9.5% expected, 12.6% during prior quarter) Wednesday: MBA Mortgage Applications, week ended August 5 (1.2% during prior week), Consumer Price Index, month-over-month, July (0.2% expected, 1.3% during prior month), CPI excluding food and energy, month-over-month, July (0.5% expected, 0.7% during prior month), CPI year-over-year, July (8.7% expected, 9.1% during prior month), CPI excluding food and energy year-over-year, July (6.2% expected, 5.9% during prior month), CPI Index NSA, March (296.584 expected, 296.311 during prior month), CPI Core Index SA, July (295.686 expected, 294.354 during prior month), Real Average Hourly Earnings, year-over-year, July (-3.6% during prior month, revised to -3.4%), Real Average Weekly Earnings, year-over-year, July (-4.4% during prior month, revised to -4.0%), Wholesale Inventories, month-over-month, June final (-1.9% expected, 1.9% during prior month), Wholesale Trade Sales, month-over-month, June (0.5% during prior month), Monthly Budget Statement (-$88.8 billion) Thursday: Initial jobless claims, week ended August 6 (265,000 expected, 260,000 during prior week), Continuing claims, week ended July 30 (1.425 million expected, 1.416 during prior week), PPI final demand, month-over-month, July (0.3% expected, 1.1% during prior month), PPI excluding food and energy, month-over-month, July (0.4% expected, 0.4% during prior month), PPI excluding food, energy, and trade, month-over-month, July (0.4% expected, 0.3% during prior month), PPI final demand, year-over-year, July (10.4% expected, 11.3% during prior month), PPI excluding food and energy, year-over-year, July (7.7% expected, 8.2% during prior month), PPI excluding food, energy, and trade, year-over-year, July (5.9% expected, 6.4% during prior month) Friday: Import Price Index, month-over-month, July (-0.9% expected, 0.2% during prior month), Import Price Index excluding petroleum, month-over-month, July (-0.4% during prior month), Import Price Index, year-over-year, July (9.5% expected, 10.7% during prior month), Export Price Index, month-over-month, July (-1.0% expected, 0.7% during prior month), Export Price Index, year-over-year, March (18.2% during prior month), Bloombgerg August United States Economic Survey, University of Michigan Consumer Sentiment, August preliminary (52.4 expected, 51.5 during prior month), U. of Mich. Current Conditions, August preliminary (57.5 expected, 58.1 during prior month), U. of Mich. Expectations, August preliminary (48.8 expected, 47.3 during prior month), U. of Mich. 1 Year Inflation, August preliminary (5.1% expected, 5.2% during prior month), U. of Mich. 5-10 year Inflation, August preliminary (2.8% expected, 2.8% during prior month)" — "Earnings Calendar Monday: 3D Systems (DDD), ACADIA Pharmaceuticals (ACAD), Allbirds (BIRD), American International Group (AIG), Barrick (GOLD), BioNTech (BNTX), Dominion Energy (D), Elanco Animal Health (ELAN), Energizer (ENR), Freshpet (FRPT), GoodRx (GDRX), Groupon (GRPN), Lemonade (LMND), Marriott Vacations (VAC), News Corp (NWSA), Novavax (NVAX), Palantir Technologies (PLTR), Radware (RDRW), SmileDirectClub (SDC), Switch (SWCH), Take-Two Interactive Software (TTWO), Tanger Factory Outlet Centers (SKT), Tyson Foods (TSN), Upstart (UPST), Vroom (VRM) Tuesday: Akamai Technologies (AKAM), Bausch Health (BHC), Bloom Energy (BE), Capri Holdings (CPRI), Carlyle Group (CG), Coinbase (COIN), Dine Brands (DIN), Emerson (EMR), Grocery Outlet (GO), H&R Block (HRB), Hilton Grand Vacations (HGV), Hyatt Hotels (H), IAC (IAC), iRobot (IRBT), Norwegian Cruise Line (NCLH), Planet Fitness (PLNT), Ralph Lauren (RL), Roblox (RBLX), Spirit Airlines (SAVE), Sysco (SYY), The Trade Desk (TTD), Unity Software (U), Warner Music Group (WMG), World Wrestling Entertainment (WWE), Wynn Resorts (WYNN) Wednesday: AppLovin (APP), Coherent (COHR), Coupang (CPNG), Dutch Bros(BROS), Fox Corp. (FOXA), Jack in the Box (JACK), Red Robin Gourmet (RRGB), Sonos (SONO), Traeger (COOK), Wendy's (WEN), Wolverine World Wide (WWW) Thursday: AerCap (AER), Baidu (BIDU), Brookfield Asset Management (BAM), Canada Goose (GOOS), Cardinal Health (CAH), Dillard's (DDS), Flower Foods (FLO), LegalZoom (LZ), Poshmark (POSH), Rivian Automotive (RIVN), Six Flags (SIX), Solo Brands (SOLO), Toast (TOST), Utz Brands (UTZ), Warby Parker (WRBY), W&T Offshore (WTI), Wheaton Precious Metals (WPM) Friday: Broadridge Financial (BR), Honest Compant (HNST), Spectrum Brands (SPB)" My COMMENT The inflation data will be a total crap shoot. I dont think anyone really knows what is going on. In any event....the data is not very important at this point. EVERYONE in the world knows that we will see another 0.75% increase by the FED in September. So just ignore all the media speculation that will follow the reports this week. I do actually want to see that increase in September......and....even again in October and November. We really need to normalize rates. All in all not much going on this week. It is the traditional vacation month for Wall Street. Everyone will be back after Labor Day. Although with computers everyone works no matter where they are.
RALLY TIME......at least for 40 minutes. I have not looked at anything today s I have no idea of what the daily media speculators are saying....it simply does not matter. I like this strong open today. I was half expecting to see a DOWN market start today. This seems to show strength in the markets and HOPEFULLY momentum building to the positive side. OBVIOUSLY there are still going to be many down days and down weeks. They key will be if we can continue to string together general POSITIVE days and weeks for a period of months. We need to see the YTD return of the SP500 continue on a path of improvement . The one thing I do know.....the market environment has sure been a lot nicer over the past couple of months compared to the start of the year. I continue to say that we hit the bottom at the end of June......a soft bottom.
Here is an article that I mentioned the other day. Mortgage rates drop below 5% for first time since April https://www.cnn.com/2022/08/04/homes/mortgage-rates-august-4/index.html (BOLD is my opinion OR what I consider important content) Mortgage rates dropped for the second week in a row, falling below 5% for the first time since mid-April. The 30-year fixed-rate mortgage averaged 4.99%in the week ending August 4, down from 5.3% the week before, according to Freddie Mac. But that is still significantly higher than this time last year when it was 2.77%. Rates rose sharply at the start of the year, hitting a high of 5.81% in mid-June. But since then, economic concerns have made them more volatile. "Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth," said Sam Khater, Freddie Mac's chief economist. The up and down is expected to continue, he said. "The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment." The drop comes as surprisingly positive reports for some economic indicators counterbalanced the talk of looming recession, said George Ratiu, Realtor.com's manager of economic research. "Without a clear direction, markets are confining mortgage rates to move within a tighter range, as the sharp upward push has moderated," he said. In response to high inflation the Federal Reserve raised its benchmark interest rate by 75 basis points last week, the second hike of that size in as many months. The Federal Reserve does not set the interest rates borrowers pay on mortgages directly. Instead, mortgage rates tend to track 10-year US Treasury bonds. But they are indirectly impacted by the Fed's efforts to tame inflation. As for consumers, he said, they continue to spend, amassing a record $16.2 trillion in household debt according to data the Federal Reserve released this week. "The big question for consumers is whether companies will over-react to the recession concerns and start trimming payrolls," Ratiu said. "A sharp pullback in hiring could have a direct impact on people's ability to keep spending, especially with today's high inflation." Affordability still the biggest challenge The higher costs to finance a home have already had an impact on buyers. Sales of both new construction and existing homes have fallen in recent months as buyers take a break from house hunting. Buyers are finding homes even less affordable as inflation takes a larger chunk of their income and the rising cost of borrowing has reduced their purchasing power. A year ago, a buyer who put 20% down on a $390,000 home and financed the rest with a 30-year, fixed-rate mortgage at an average interest rate of 2.77% had a monthly mortgage payment of $1,277, according to numbers from Freddie Mac. Today, a homeowner buying the same priced house with an average rate of 4.99% would pay $1,673 a month in principal and interest. That's nearly $400 more each month. With increased borrowing costs setting an affordability ceiling for many buyers, home sales are dropping, said Ratiu. At the same time, inventory is improving. "This brought a welcome sign in this year's real estate markets -- price cuts," Ratiu said. However, with buyers dropping out, some sellers are holding back too, feeling they have missed the market's peak, according to Realtor.com. Homeowners with equity may not be compelled to sell in this slower market with higher financing costs. "As the number of new listings softens, it raises the concern that the nascent improvement in inventory may prove elusive as we approach the latter stages of summer," said Ratiu."" MY COMMENT Good news for buyers....but still.....a significant increase from the rates that we have been living with for the past two to three years.
I like this little article. Sinema Speaks, Delivering Inflation Reduction Act Tweaks Potential tax changes creep into the spotlight. https://www.fisherinvestments.com/e...aks-delivering-inflation-reduction-act-tweaks (BOLD is my opinion OR what I consider important content) "Editors’ Note: MarketMinder favors no politician nor any political party. Our commentary is intentionally nonpartisan and seeks only to identify the probable market and economic impacts of developments." "Alas, we have reached August—the notoriously slow news month when most governments are in recess and people worldwide are trying to squeeze in one final vacation before the kiddos go back to school. That doesn’t mean nothing happens, of course. But we do think it kind of explains why even slight changes to draft legislation can get heaps of attention. So it went Friday with the artist formerly known as Build Back Better (BBB) and now titled the “Inflation Reduction Act” (IRA), which received centrist Senator Kyrsten Sinema’s (D-AZ) backing after a few tweaks to the package of tax changes, climate and healthcare spending that moderate Joe Manchin (D-WV) hashed out with Majority Leader Chuck Schumer last week. As we write, most observers expect swift passage, perhaps as soon as late Sunday or early Monday. That could prove a touch optimistic, but regardless: Given the outsized attention and chatter about their potential impact on stocks, the bill’s main tax provisions seem worth a look. To pass, the bill will first need the Senate Parliamentarian’s approval to enter the reconciliation process, which would enable it to pass on a simple-majority, party-line vote. That remains up in the air. Senate Parliamentarian Elizabeth MacDonough remains holed up in her office reviewing the draft legislation, and Congressional aides from both sides of the aisle are reportedly parading through to lobby her. (We have the utmost sympathy for her current ordeal.) For spending measures to qualify, they must be strictly budgetary, not policy changes dressed up as budget items, and some observers suspect pieces of the climate and healthcare provisions won’t qualify. If the bill clears that hurdle, then it needs unanimous support from Democratic Senators, which doesn’t seem certain yet. Manchin hasn’t yet weighed in on the changes Sinema drove, which remove one tax provision he wanted (eliminating the carried-interest provision) and add one he seemingly nixed several months ago (an excise tax on stock buybacks). This could be an unsolvable impasse. Even if it isn’t and the bill clears the Senate, its path in the House isn’t clear. The IRA is far removed from the version of BBB that passed in the House late last year, and it could be too watered down for some lawmakers’ tastes. It also doesn’t remove the cap on state and local tax deduction, which several Democratic lawmakers have demanded. Maybe this sails through, but we aren’t sure it will be so easy. Popular opinions on the bill generally fall into two camps: One seeing it as a package of deleterious tax hikes, and one seeing it as a win-win of output-boosting spending and deficit reduction. We think both positions are overly extreme and see the whole package as largely benign. Not because its provisions are inherently fine, but because it has zero surprises. Everything in it has been discussed to death for a year or more, and the final package is watered-down greatly from initial proposals, as we wrote in late July. Plus, simply passing the thing would end uncertainty over what will change, enabling markets to move on. The combination of less-sweeping-than-expected legislation and falling uncertainty should be a tailwind. For instance: If the IRA does become law with all of Sinema’s changes intact, it would exclude the carried interest tax hike that was in the Manchin/Schumer compromise. This is the tax code provision that lets private equity managers (and their ilk) pay partnership income from these funds at capital gains rates versus income tax rates. Therefore, to the extent that iteration shifted the tax code and effectively hiked rates on individuals above certain income thresholds, those are gone now. Sinema argues this will boost private equity firms’ ability to invest in the projects outlined in last week’s CHIPS Act and the infrastructure bill passed a while back, which might be true at the margins, although we wouldn’t overstate the potential benefits here. The main significance is extending the debate over the validity of this tax code provision yet again, as it seems to pop up with great regularity in campaign years. To the extent people feared this tax change affecting investment, it likely alleviates that, too. The proposed minimum corporate tax rate also got watered down in order to secure Sinema’s approval. The original version was a 15% rate applied to companies’ book income—meaning, the earnings they report to shareholders—if their annual profit exceeds $1 billion. While this rate isn’t terribly high, it would raise revenue because companies’ financial income often exceeds their taxable income. Politicians have long griped about this, seeing the difference between these figures as tax-avoidance shenanigans and an uptapped gold mine. That betrays a fundamental misunderstanding of financial accounting and why the figures are different—and why many businesses argued the new tax would hit domestic manufacturers hard. When companies’ book income differs from the income they report to the IRS, it isn’t because they are hiding revenue streams and inventing costs to secure a lower tax bill. Rather, the standards are different. To calculate the financial results reported to shareholders, companies use Generally Accepted Accounting Principles (GAAP), which are set by the Financial Accounting Standards Board (FASB). The goal is to give investors clear insight into a company’s revenues, costs and overall financial health. So it includes rules like real-time depreciation of capital equipment and other similar assets, marking them down as they decline in productivity over many years. The tax code, by contrast, generally aims to maximize the government’s revenue while encouraging investment and offering incentives in line with what the politicians who write it favor. Those incentives include the accelerated depreciation of capital equipment, which lets companies expense the entire investment up front—a tax incentive to boost capital expenditure and encourage more investment. After the Manchin/Schumer draft appeared last week, there was a flurry of opposition from advanced manufacturers, which argued losing the tax benefit of accelerated depreciation would discourage capex and cause American factories to fall behind the world technologically. Hence, Sinema won a carveout preserving this deduction—easing another fear. We aren’t saying this is the best-case outcome: We think taxing companies’ book income opens a can of worms in the long run, as it transfers control of the corporate tax code from Congress to the unelected FASB, removing accountability and transparency. It therefore potentially pushes some tax rule changes into the shadows, which could inject more uncertainty long-term. It wouldn’t shock us if this ultimately wended its way through the courts to see if the Justices agree. But in the meantime, considering companies are quite familiar with GAAP standards and the new rules wouldn’t even apply to the entire S&P 500, let alone every publicly traded company, we doubt it qualifies as a fresh wallop. Not when markets have been pricing it in for over a year and a half now. The same goes for the small 1% excise tax on stock buybacks. Yes, as a general rule, the more you tax something, the less you get of it. So in principle it is an incentive against stock buybacks. But buybacks have always been a cost/benefit calculation for companies, and we doubt a small penalty changes the calculus much provided the long-term return makes it worthwhile. Even if we do get fewer buybacks, those alone haven’t propped up stocks over the years. They are merely one check on overall stock supply and one way of returning cash to shareholders. Perhaps the upshot will be more dividends. Mind you, we find the change a bit silly, considering we have never seen compelling evidence that buybacks detract from capex, but political narratives often don’t need reality to underpin them. Rounding out the tax fears, we have the proposed methane-emissions tax, included in the IRA in the name of encouraging oil and gas firms to reduce emissions. Even though the bill tried to sweeten this with subsidies for emission-reduction efforts, industry leaders argue it is a headache that could discourage investment in oil and natural gas—a theme that seems to have gained traction, considering the widespread portrayals of the IRA as overall negative for Energy stocks. In our view, that ignores the bill’s mandate to reopen leasing in the Gulf of Mexico and elsewhere—and glosses over the fact that it was brokered by Senator Manchin, who represents a fossil fuel state. Even if the bill did discourage production, Energy firms’ earnings are tied to oil and gas prices, not production volumes, so the change probably wouldn’t punish earnings at all. That may not be great from a gas price point of view, but it seems hard to argue any of this is inherently bad for Energy earnings. Overall, we see these tax tweaks as a mixed bag that creates winners and losers—but is too watered down and too widely expected to make waves in the market from here. Are there some new headaches for businesses? Probably. But there are also plenty of areas where those headaches won’t be as bad as feared. Most importantly, ending the will-they-or-won’t-they lets investors get over the uncertainty and enjoy the increased gridlock that likely follows midterms." MY COMMENT YES.....the markets want CERTAINTY more than anything else. Now we will have all this stuff out of the way.....if.....the house follows suit. These people doing this stuff are so predictable. As soon as I saw the language of the initial bill.....I told people in my life......"wait and see, that carried interest tax change will NOT be in the final bill". That was a classic political contribution clause. Put it in a bill and the contributions FLOW IN. As usual......in spite of all the platitudes and posturing....MONEY TALKS......the "RICH" and "POLITICALLY POWERFUL".....come out on top as usual.
Here a the BIG story today....at least for me. Nvidia warns of lower second-quarter revenue on gaming weakness https://finance.yahoo.com/news/nvidia-expects-second-quarter-revenue-130741568.html (BOLD is my pinion OR what I consider important content) "(Reuters) -Nvidia Corp on Monday warned its second-quarter revenue would drop by 19% from the prior quarter on weakness in its gaming business, sending the chip designer's shares down about 5% in early trading. The company reported preliminary results for the second-quarter just days after chipmaker Intel Corp and Sony Group Corp slashed their annual forecasts on demand concerns. The gaming industry, largely considered to be recession proof, is beginning to see some weakness as consumers weigh purchases of discretionary items such as laptops and video game consoles. "As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory," Chief Executive Officer Jensen Huang said in a statement. Chipmakers have been struggling with worsening supply-chain snarls due to the Russia-Ukraine conflict and COVID-19 curbs in China manufacturing hubs. Nvidia said the gaming unit's preliminary revenue, which includes sales of high-end graphic cards for desktops and laptops, declined 44% sequentially to $2.04 billion for the quarter ended July 31. Last month, Xbox-maker Microsoft reported a slump in gaming revenue while PlayStation maker Sony trimmed its forecast on waning consumer interest as a lack of new games and easing of COVID-19 constraints hit gaming demand. The company, which expects second-quarter revenue of about $6.70 billion compared with $8.10 billion forecast earlier, is scheduled to report results on Aug. 24. Analysts expect revenue of $8.1 billion, with contribution from gaming at $3.12 billion, according to IBES data from Refinitiv. Second-quarter results will include charges of $1.32 billion due to excess inventory and future demand, the company said." MY COMMENT What NVIDIA is suggesting for "revenue" is way below the estimates. It is smart for them to get this out there before earnings are released. May as well take the hit now and lower expectations. Much of this earnings "stuff" is all about managing expectations. Some to the BEST company managers are experts on managing expectations. As to the company....STILL....an extremely well managed up and coming company with a bright future. On the flip side of the coin....the problem with these chip companies is the fact that they often dont seem to live up to the expectations. It is simply a BOOM or BUST type of business.
Looks like we are off to a good start so far this morning. It also looks like the meme stocks are back at it again.
Here is another nice little article for a RALLY DAY. Why investors should still love stocks like Apple, Amazon, Microsoft, and Google: Morning Brief https://finance.yahoo.com/news/stoc...osoft-and-google-morning-brief-100016716.html (BOLD is my opinion OR what I consider important content) "I stunned my co-anchor Julie Hyman on Friday when I expressed optimism about the path forward for movie theater chain AMC late last week. It’s not that AMC is going to be a rip-roaring growth stock over the next 25 years or that it has done everything right the past two years. Rather, there is now a solid theme behind a company such as AMC that could drive better fundamentals during the next 12-18 months: Specifically, people are increasingly eschewing Netflix and Roku (as seen in each’s poor quality second quarters and outlooks) and are returning to theaters to watch some very good movies. Against the backdrop of that theme, AMC is likely to build on its encouraging second quarter for attendance, sales, and profits — which could be supportive of the stock price. AMC CEO Adam Aron will be on Yahoo Finance Live on Monday morning, and we obviously have lots to chat about. But more generally, it's worth it for investors to consider a few themes of their own as markets eye up the final few months of the year. Thematic investing is once again being dusted off by Wall Street as a key differentiator, as most investors believe they have sense of how the Federal Reserve and economic concerns play into the outlook. “The market has been deservedly focused on a mix of macro risks and influences this year," Citi strategist Scott Chronert wrote in a new note to client. "As we move closer to recession resolution, the longer-term growth profiles associated with many themes may provide some performance edge, particularly on the heels of year-to-date valuation corrections. A new trading environment on the other side of current concerns may mean stock-specific valuation catalysts may be more closely tied to fundamentals give a lower expected macro growth profile and lesser central bank accommodation." Chronert outlined six compelling investment themes: Automation/Robotics, Internet Driven Business Models, Artificial Intelligence, Emerging Market Consumer, Top Brands, and Net Zero. Specific stocks highlighted in the note included: Apple Meta Nvidia Amazon Microsoft Disney Google Netflix General Motors You may notice an abundance of tech stocks on this list and be wondering why, given the notion that “tech stocks can’t do well in a rising interest rate environment.” But this group of stocks not only operate in industries that cover the bulk of these themes, but have also had superior sales/earnings growth the past five years, a reasonable (current) valuation, and improving investor sentiment. To which I will say three things. First, thematic investing is a relatively long-term venture — that is, the idea here is not to buy one of these stocks with an eye to flipping it by the close of trading. Secondly, Chronert’s work highlights how thematic investing tends to work in an array of economic and rate backdrops. The key takeaway: thematic investing tends to outperform an equal-weighted basket for the S&P 500. And lastly, is it really etched in stone that tech stocks always suck wind as rates rise? “Tech stocks are not as tied to rates as a lot of investors think," John Hancock co-chief investment strategist Emily Roland said on Yahoo Finance Live on Friday. "We have looked at the data and the relationship is not actually that strong. We have seen it in recent times be correlated, but what happens in an economic growth slowdown is you want to own companies that have more durable profitability, have more earnings stability and have more cash on their balance sheets to deploy. You are going to find that in technology companies."" MY COMMENT FINALLY.....someone else besides me pointing out the IDIOCY of tying the TECH GIANTS to interest rates. WTF......this is just DUMB. These BIG CAP companies are the leading companies of the entire business world. After all they make up around 25% if not more of the market cap of the SP500. These companies are like Proctor & Gamble, GE, and Phillip Morris in the old days. They are the BUSINESS GIANTS. If anything people should be fleeing into these companies when economic times are shaky. These companies should be seen as the safe place for investors to sit in the markets when the economy is struggling.
Yep.....I looked. My account is small green today. NINE of my ten stocks are nicely UP. BUT....Nvidia is hammering my overall performance today with their current LOSS of 7.5% right now. Hopefully that loss can moderate over the day and allow me to capture the big gains that we are seeing so far today.
OH NO......I'm melting.....I'm melting. Apologies to...."The Wizard Of Oz". We are seeing the typical mid day EAST COAST fade today. The markets need to fight back and buck up. The impact of the NVIDIA drag today.
