The Long Term Investor

Me too.....Road.

 

I bet few people expected the open today to be in the green. Not that we will end the day that way.

HERE is a big part of what is wrong with the markets right now.....RAMPANT media speculation and fear mongering.

The biggest Fed rate hike in 40 years? It could be coming next week.

https://www.marketwatch.com/story/t...ke-in-40-years-it-might-be-coming-11663097227

The headline is bad enough....but here is the opening to the article.

"Desperate times call for desperate measures, and times are, arguably, increasingly desperate. The persistence of high inflation might force the Federal Reserve to resort to the biggest increase in a key U.S. interest rate in more than 40 years."

MY COMMENT

When people are bombarded by stuff like this every day.....is there little wonder investors have no idea what to think or do? Most people that are under 40 dont have much experience investing or living in a bear market time span. It is very hard to be a long term investor and know what to do when you are constantly being hit with this sort of stuff.

Please......ignore it all. Do your own thinking.......there is plenty of research and actual data out there on the internet. Being a REACTIONARY INVESTOR.....is a sure recipe for failure.

 

On the same topic.

Our Take on Tuesday’s Sharp Swings and CPI
Staying cool and thinking longer term are vital at times like this.

https://www.fisherinvestments.com/en-us/marketminder/our-take-on-tuesdays-sharp-swings-and-cpi

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

"Stocks’ rocky 2022 certainly continued Tuesday, as the S&P 500 fell -4.3%—with most blaming disappointing inflation data. But in our view, the large drop extends this year’s one constant: Sentiment seems detached from reality. While we don’t deny the pain of higher prices and interest rates—and negativity like Tuesday’s can sting—investors’ moods and reactions to incoming information seem overall too dour relative to the observable facts on the ground. In our view, Tuesday’s August US Consumer Price Index (CPI) report provides a timely example. Headline CPI decelerated, albeit less than expected, but an acceleration in “core” CPI, which excludes food and energy, triggered more handwringing over a potential 75 basis-point Fed rate hike later this month. Even though investors have been penciling in that large of a Fed rate hike for several weeks now. When stocks sink on emotional flashpoints rather than a materially negative shift in incoming information, we think it is a strong signal that staying cool remains the wisest move.

The CPI report itself held few new or surprising insights. The headline reading slowed from 8.5% y/y in July to 8.3%, missing expectations for 8.1%.[ii] The 0.1% month-over-month increase sped from August’s flat reading but remains below the long-term monthly average.[iii] Yet, extending August’s trend, falling gasoline prices drove much of the deceleration, masking continued price increases elsewhere. Those were more apparent in core CPI, which accelerated from 5.9% y/y to 6.3%, with the month-over-month change speeding from 0.3% to 0.6%.[iv] That may seem sharp, but the month-over-month figures have been quite volatile throughout this high-inflation stretch, and extrapolating any of them forward—whether they were faster or slower—would have been an error. Such is the nature of monthly data.

Much of today’s coverage tried to dig deeper, leading to conclusions that August’s results show inflation is stickier than first expected—hence all the talk of big Fed rate hikes to come. In our view, this is a philosophical error. You can’t look to current price moves to predict future price moves. Looking at CPI’s various subcategories can help identify trends, but these are generally backward-looking. For instance: It is probably fair to conclude that, with core services and core goods measures accelerating, higher energy and petrochemical feedstock costs are starting to bleed through into consumer prices … to some extent. That delayed reaction isn’t surprising, given producers will hedge these costs and try everything possible to avoid passing them to customers, lest they lose market share by reacting to temporary surges in commodity prices. (And it seems like a stretch to connect those theories to shelter, which was the single largest contributing category to the monthly rise, beyond the fact that many rental agreements include utilities.) But this isn’t guaranteed to continue indefinitely, especially with most US energy prices trickling downward more recently. Said differently: Just because core prices tend to be overall less volatile than headline prices doesn’t mean every move is part and parcel of a long-term trend.

Another thing about prices: To the extent monetary policy affects them, it usually happens at quite a lag—anywhere from 6 to 18 months or so, depending on the study in question. Therefore, the argument that August’s inflation data necessitate more Fed rate hikes doesn’t hold up. The Fed started hiking this past March, and even then, the increase was only incremental. We wouldn’t expect the totality of this year’s rate hikes to have an effect on inflation readings until sometime next spring or summer. So from that standpoint, we guess we can understand the concern about more big Fed moves from here: If the Fed continues reacting in a big way to incoming data rather than taking a more measured, long-term approach, then it raises the likelihood of overshooting. But also, we are skeptical that this became far more likely today than it was yesterday. Actually, we are skeptical that the probability is calculable, period—in our experience, Fed moves are unpredictable. Fed people talk a lot but often change their minds. They interpret data in unexpected, counterintuitive, rather bizarre ways and vote by consensus. They pledge to stop issuing forward guidance and then continue issuing forward guidance. They do what they do when they do it.

At the same time, the market has been predicting a big Fed move for some time. Throughout this rate hike cycle, the 3-month US Treasury yield has risen in advance of Fed rate hikes and generally reached the new upper bound of the fed-funds target range before the Fed officially raises it. The 3-month yield closed Monday at 3.17%, which is 67 basis points above the fed-funds target range’s current upper limit.[v] If the history in Exhibit 1 is at all a reliable guide, it suggests markets have been pricing in the likelihood of a three-quarter-point Fed move since the last meeting in July. If the Treasury market has been able to digest this information, it stands to reason that the equally efficient and liquid stock market has already done the same.

Exhibit 1: The Remarkably Prescient Treasury Bill Market



Source: FactSet, as of 9/13/2022. 3-month US Treasury yield (constant maturity) and fed-funds target range (upper bound), 12/31/2021 – 9/12/2022.

Rather than trying to determine future Fed moves, we suggest focusing on sentiment, which we think has been the primary negative influence on stocks this year. Inflation dread is a primary contributor to that, as it feeds into Fed fears. So, if inflation moderates over the period ahead—despite wiggles along the way—then it probably points to improving sentiment. We see a high likelihood of that happening. Fisher Investments founder and Executive Chair Ken Fisher catalogued a bunch of factors pointing to moderate inflation in his latest column for Real Clear Markets, and if you haven’t yet read it, we think it is well worth doing so after you are done here. But in short, between falling food and energy commodity prices, slowing money supply growth, falling gas prices, the big moderation in Purchasing Managers’ Index price gauges, falling shipping costs and a nascent drop in housing costs, there are ample reasons to think the inflation rate is set to slow, gradually and irregularly, over the foreseeable future.

So think longer term, both now and as data and markets wobble from here. Nothing moves in a straight line, be it inflation data or a stock market recovery. Even a new stock market low is possible if sentiment stays bad enough for long enough. But new bull markets usually begin when investors think any light at the end of the tunnel must be an oncoming train, and that mentality reigns today. That suggests a recovery—a new bull market—is close by, if it isn’t already underway.

MY COMMENT

Very good reasoning and common sense above. But when people are losing money and there is a crescendo of negativity being pumped out day after day......investors that thought they were long term often buckle under the pressure.

You have to do what is right for you......but if you have time.....beware shooting yourself in the foot.

 

There is one very good aspect of the current higher rates like the current Ten Year Treasury being at about 3.44% today. Many companies........like insurance companies......benefit from being able to lock in higher interest rates for their reserve investments. Sure they know how to hedge for rates and currency. BUT....it has been a long time since higher rate safe investments were available to them.

 

For those that are into DOOM & GLOOM......and like to spend their time imagining every boogeyman that might be in the closet or under the bed......here you go....this one is for you. For anyone else......no reason to read this article.

Six Potential Horsemen of Financial Apocalypse

https://www.realclearmarkets.com/ar..._horsemen_of_financial_apocalypse_853205.html

MY COMMENT

NO I am not going to post it or spend any time thinking about any of this stuff. After all an asteroid might take me out tomorrow.

 

HERE is a little bit of good news today.

Wholesale prices fell 0.1% in August amid inflation fears

https://www.cnbc.com/2022/09/14/producer-price-index-august-2022.html

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


"Key Points

• The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, in line with expectations.
• On a year-over-year basis, the index, which is a gauge of wholesale prices, increased 8.7%, the lowest increase since August 2021.

The prices that producers receive for goods and services declined in August, a mild respite from inflation pressures that are threatening to send the U.S. economy into recession.

The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, according to a Bureau of Labor Statistics report Wednesday. Excluding food, energy and trade services, PPI increased 0.2%.

Economists surveyed by Dow Jones had been expecting headline PPI to decline 0.1%.

On a year-over-year basis, headline PPI increased 8.7%, a substantial pullback from the 9.8% increase in July and the lowest annual rise since August 2021. Core PPI increased 5.6% from a year ago, matching the lowest rate since June 2021.

As has been the case over the summer, the drop in prices came largely from a decline in energy.

The index for final demand energy slid 6% in August, which saw a 12.7% slide in the gasoline index that was responsible for more than three-quarters of the 1.2% decline in prices for final demand goods. That helped feed through to consumer prices, which fell sharply after briefly surpassing $5 a gallon at the pump earlier in the summer.

Wholesale services prices increased 0.4% for the month, indicating a further transition for a pandemic-era economy where goods inflation soared. Final demand services prices increased 0.4% for the month, with the balance of that coming from a 0.8% increase in trade services.

Those numbers come a day after the BLS reported consumer price index data for August that was higher than expected. The two reports differ in that the PPI shows what producers receive for finished goods, while the CPI reflects what consumers pay in the marketplace.

The PPI can be leading indicator for inflation as wholesale prices feed through the economy. However, it’s importance has been tempered over the years as manufactured goods make up less of a share of total spending.

Following the Tuesday report, stocks tanked and expectations surged for Federal Reserve action at its meeting next week. Stock market futures were positive after the PPI report while Treasury yields were higher as well.

Markets were debating between a half percentage point and three-quarter point interest rate increase. After the release, the market fully priced in a three-quarter point move, and there is now a 1-in-3 chance of a full percentage point hike, according to fed funds futures data tracked by the CME Group."

MY COMMENT

Ok.....a counterbalance to the news yesterday. BUT......none of this data is particularly relevant to REAL INVESTORS. TRADERS.....that is a different story. Although we know what the data shows about trading over the long term.....it produces DISMAL RESULTS.

 

BUMMER for house hunters.

U.S. mortgage interest rates top 6% for first time since 2008

https://finance.yahoo.com/news/u-mortgage-interest-rates-top-110607295.html

MY COMMENT

How soon we forget what NORMAL mortgage rates are. I am sure this is a shock to most people that have never owned a home. But for anyone else that has purchased in the past.....most of us know that this is simply NORMAL. SO.....get used to it....rates are going to go UP from here. I would guess that we will settle in between about 6.5% to 8%.

These articles in my view tend to understate the actual rate that most people WILL pay with ZERO POINTS.

I was talking to a REALTOR over the weekend.....she was remembering back in the past when we have MASSIVE INFLATION she had a home loan at 18%. Our third home which we purchased in the late 1970's had a rate of around 12%.

LOL......I know.....we walked 30 miles to school in the snow every day and it was uphill both ways.

 

Good one Smokie.

 

A very back and forth day today....but in the end the GREEN won out for the averages. It also won out for me. I had a good moderate gain today. I was held back from doing better than I did by HON which was down by 2.71% today. Earlier in the day I tried to find what was driving the stock down but nothing came up in the news when I searched.

I ALSO beat the SP500 today by.....drum roll please......0.01%.

I has six stocks UP today and four stocks DOWN.

I think we did well today to not get sucked into the vacuum that the markets created yesterday. To me a HUGE overreaction yesterday....but it is what it is.

 

You know me and working from home. This combines that topic and one of my ten stocks TESLA.

Tesla struggles with Elon Musk’s strict return-to-office policy

https://www.cnbc.com/2022/09/14/tesla-struggles-with-elon-musks-strict-return-to-office-policy.html

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

Key Points

• More than three months after Elon Musk’s back-to-office edict, Tesla still doesn’t have the room or resources to bring all its employees back to the office, sources say.
• The company is now surveilling employees’ attendance, with Musk and other execs receiving detailed weekly reports on absenteeism.
• Some employees who were previously designated as remote workers, but who said they may not be able to relocate to meet the return-to-office requirements were dismissed in June.

Tesla CEO Elon Musk enacted a strict return-to-office policy this spring, informing employees suddenly by email on May 31 that they would need to “spend a minimum of forty hours in the office per week.” Anything else, he suggested, was “phoning it in.”

Three months since this edict, Tesla still doesn’t have the room or resources to bring all its employees back to the office, according to people who work for the company in the United States and internal documents seen by CNBC. The people declined to be named because they were not authorized to talk to the press on behalf of the company.

The return-to-office policy has also caused a decline in morale, especially among teams that allowed employees to work remotely as needed before Covid-19.

In general, Tesla had been open to remote work among employees in office roles before the pandemic. As the company’s workforce expanded in recent years, the focus was on building out international hubs and a new factory in Texas. It did not build enough new workspaces or acquire enough office equipment at existing facilities in Nevada and California to bring all office employees and long-term contractors in forty hours per week.

According to several current people who work there, Tesla recently wanted to bring its employees in the San Francisco Bay Area to the office for 3 days per week, but a shortage of chairs, desk space, parking spots and other resources proved too much. (Some of this was previously reported by The Information.) Instead, Tesla set staggered in-office schedules back to two days per week.

Even simple supplies like dongles and charging cords have been in short supply. On days where more employees are scheduled to work on-site, crowded conditions send people to take phone calls outdoors, as Tesla never built enough conference rooms and phone booths to accommodate this many employees in attendance at once.

A hit to morale

The company is now surveilling employees’ attendance, with Musk receiving detailed weekly reports on absenteeism.

In early September, internal records show, about one-eighth of employees were out on a typical day in Fremont, California, the home of Tesla’s first U.S. vehicle assembly plant. Across all of Tesla, that number was only slightly better, with about one-tenth of employees absent on a typical workday.

The numbers have remained within that range since March 2022, pre-dating Musk’s orders, according to internal reports viewed by CNBC. Absenteeism spikes on weekends and around holidays, as one might expect.

Absenteeism at Tesla is measured using data from workers badging into facilities, with unplanned absences divided by planned time off to tabulate daily totals, according to internal records and people familiar with the reports sent to Musk.

Not all employees are tracked the same way. Direct reports to Elon Musk do not have their badge swipes counted for the internal reports, for example.

The return-to-office policy -- murky and informal as it is -- has caused a significant decline in morale among some employees, according to internal messages seen by CNBC.

Before COVID-19 restrictions, Tesla managers generally figured out how much remote work was appropriate for their teams. Musk’s hardline policy eliminated that freedom in theory, though some execs may still be able to carve out deals for “exceptional” employees.

In early June 2022, right after Musk mandated 40 hours on site for all, Tesla made steep cuts to its headcount. Employees who were previously designated as remote workers but who could not relocate to be in the office 40 hours a week were given until September 30 to move or take a severance package from Tesla.

About a week after making that offer internally, Tesla HR asked people who lived far away whether they planned to move and work in a Tesla office 40 hours a week. Some of those who said they were not sure if they could relocate, or who said they definitely could not move, were dismissed in June without warning, according to internal correspondence read by CNBC and two people directly familiar with the terminations.

The policy has also depleted some of Tesla’s power to recruit and retain top talent. At least a few well-liked employees quit because they wanted more flexible arrangements, according to internal correspondence and two resignations confirmed by CNBC.

Some workers who lived far from a Tesla office are now living hours away from their families to meet the new requirements, one employee told CNBC.

This employee said they worried most of all about immigrant workers at Tesla, who could lose their visas if the company suddenly decides to terminate their roles over the shifting attendance mandate.

They also worried about how Tesla’s closed-mindedness about remote work could hit the company’s diversity goals.

In its 2022 diversity report, released in July, Meta disclosed that: “US candidates who accepted remote job offers were substantially more likely to be Black, Hispanic, Native American, Alaskan Native, Pacific Islander, veterans and/or people with disabilities,” and “Globally, candidates who accepted remote job offers were more likely to be women.”

In Tesla’s most recent 2021 Impact Report, which it published in May 2022, the company boasted about how it kept employees feeling connected even as they worked from remote offices.

The report said, “During the global pandemic, we focused a great deal on expanding our community engagement and ensuring our employees stayed connected. Specifically, we expanded our Employee Resource Groups (ERGs) and ensured our programming was accessible in a remote work environment...We ensured our employees felt more heard and connected than ever before as they pivoted to virtual events to promote inclusion across different locations, physical boundaries and time zones.”

The company did not break out numbers for how many employees it allowed to work from remote locations before and after the pandemic began, or how that impacted the demographic mix of its workforce.

Tesla did not respond to a request for comment."

MY COMMENT

Kind of a GOSSIP article with an OBVIOUS slant against the company and the return to work policy. The author throws in everything but the kitchen sink to bad mouth the return to work policy. No source is named or identified for anything.

What it does show is the fact that MUSK is serious and not going to put up with any BS. So I guess people at TESLA have a choice.......work for the company in the fashion that the company wants.....or leave. People can decide for themselves.....and if they think they dont want to work, at work......and have value with their skills......they can leave.

Somehow I dont think that MUSK will care.

 

Here is how we did today in general.......we have a couple of days left this week. It will be interesting to see how they go.

Nasdaq closes higher on Wednesday as stocks stabilize following massive sell-off

https://www.cnbc.com/2022/09/13/stock-market-futures-open-to-close-news.html

"The Nasdaq Composite ground higher in choppy trading on Wednesday as investors tried to find their footing after the biggest one-day drop in more than two years.

The Nasdaq rose 0.74% to 11,719.68. The S&P 500 added 0.34% to close at 3,946.01. The Dow Jones Industrial Average inched up 30.12 points, or 0.10%, to 31,135.09 after being down more than 200 points at session lows.

Moderna was one of the top performers in the Nasdaq, jumping more than 6%. Tesla rose 3.6%, and Apple tacked on 1%.

The modest gains followed a massive sell-off for stocks on Tuesday. The Dow sank more than 1,200 points, or nearly 4%, while the S&P 500 lost 4.3%. The Nasdaq Composite dropped 5.2%. It was the biggest one-day slide for all three averages since June 2020.

The drop was sparked by August’s consumer price index report, which showed headline inflation rising 0.1% on a monthly basis despite a drop in gas prices.

The hot inflation report left questions over whether stocks could go back to their June lows or fall even further. It also spurred some fears that the Federal Reserve could hike interest rates even higher than the 75 basis points markets are pricing in.

“Tuesday’s selloff is a reminder that a sustained rally is likely to require clear evidence that inflation is on a downward trend. With macroeconomic and policy uncertainty elevated, we expect markets to remain volatile in the months ahead,” Mark Haefele, CIO of UBS Global Wealth Management, said in a note to clients.

Market breadth was mixed on Wednesday, with declining stocks slightly outnumbering gainers in the S&P 500. Materials stocks slid, led to the downside by an 11% drop for Nucor."

MY COMMENT

Looks to me like a very strong day today. I was expecting a carry over of the losses yesterday to impact today. I guess enough people thought there were bargains out there and bought today.

The next couple of days will give us a more accurate clue as to the market direction following the BIG DROP on Tuesday.

 

I have been siting here since the open waiting for the markets to settle into a direction. We opened in the red....but.....now the averages are in the green.

NICE.

 

Of the many, many headlines and articles that i see in a normal day.....it is rare to actually see much that deals with LONG TERM INVESTING.

Four Timely Timeless Lessons for 401(k) Day
Reviewing some well-known keys to successful long-term investing.

https://www.fisherinvestments.com/en-us/marketminder/four-timely-timeless-lessons-for-401k-day

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

"Last Friday was 401(k) Day in the US, a day dedicated to retirement planning. We think 401(k) plans are great—a useful tool for those traveling along the most reliable road to riches: saving and investing well over the longer term. The occasion is also an opportunity to revisit some timeless lessons we think are particularly useful during a challenging year for investors.

Lesson One: Fathom the Power of Compounding

The max contribution to a 401(k) plan in 2022 is $20,500 (plus a catch-up contribution of $6,500 for those 50 and over), which doesn’t include any employer-matching funds. Of course, one contribution of $20,500 won’t provide for retirement. Moreover, not everyone can necessarily save that sum year in, year out. However, to the extent you are able, the combination of time and saving is critical to unleashing the power of compounding. Consider what a yearly contribution of $20,500 invested the instant the market opens on the first trading day of every year combined with an 8% annual return—a little below stocks’ historical average—can turn into over 30 years. (Exhibit 1)

Exhibit 1: A Hypothetical Illustration of Compounding’s Power


Source: Math and Microsoft Excel. Note, actual investment returns are highly unlikely to be this consistent and smooth, and we realize most people make regular contributions throughout the year rather than investing a lump sum contribution at the precise beginning of every year. We share this table strictly for illustrative purposes.

Lesson Two: Long-Term Returns Include Bear Markets

The S&P 500, which we use here for its long history, has an average annualized return of 10.3%. That figure includes all the negativity over the past 96 years, from bear markets (typically prolonged and fundamentally driven declines exceeding -20%) and corrections (short, sharp, sentiment-driven declines of -10% to -20%) to pullbacks and daily dips—2022 isn’t an anomaly in that regard. Now, no individual investor likely invests with the next 100 years in mind. Most think in much shorter timeframes, so we understand concerns that one or two bad years can permanently set back a retirement portfolio.

But consider 20-year periods, which better resemble many current retirees’ timeframes. Since 1926, the S&P 500 has averaged about 5 negative years per rolling 20-year stretches. Yet no rolling 20-year period has been negative. The worst run (1929 – 1949) included the market crash of 1929, the ensuing Great Depression and World War II. Despite 10 negative years, that stretch’s average total return was 6.2%.[ii]

As we always say, the past isn’t predictive of the future, and it is always possible stocks deliver weaker—or even negative—returns over next 20 years. But making portfolio decisions based on historically unprecedented, possible outcomes isn’t wise, in our view.

Lesson Three: Most Investing Harm Is Self-Inflicted

In our experience, one of the most damaging moves investors can make is changing their asset allocation in reaction to negative volatility. If you are able to identify a bear market early enough, it can make sense to shift. But taking action for the sake of “doing something”—the comforting feeling of taking control in an uncomfortable situation—is often counterproductive. Selling when stocks are down turns paper losses into actual losses and leads to an even bigger risk: not returning to markets for the subsequent recovery. In our view, not participating in bull markets is the biggest risk to investors’ ability to reach their long-term goals.

Washington Post columnist Michelle Singletary recently highlighted the big opportunity cost of missing a recovery.[iii] She described three hypothetical 401(k) investors in September 2008 and the actions they took (or didn’t take) after US stocks had fallen by -20%:

The first investor jumped out of the market, going to all cash, and stopped making contributions. The second one also moved to cash but kept contributing to a workplace plan. The third investor kept the money invested and continued to contribute. The latter two investors each had $15,000 going into their 401(k) annually, including employer matching contributions.

By February 2012, the investor who cashed out and stopped contributing had $353,400. The worker who went to cash at least returned to making 401(k) contributions and had $404,709. The third investor had $524,600 by sticking to the original investment mix

Often in investing, “doing nothing” is the most beneficial long-term move, in our view.

Lesson Four: Nobody Said This Is Easy

That said, nothing about investing is easy. Whether you have been investing for decades or just started to learn about the stock market, nobody is perfectly immune from the market’s challenges. There is a reason why Fisher Investments’ founder and Executive Chairman Ken Fisher calls the market “The Great Humiliator.” Whatever their experience level, people are at risk of making mistakes by acting on emotional impulses. Moreover, there is no silver bullet strategy, and if anyone tells you otherwise, turn around and walk away—quickly.

But as challenging as times are today, bull markets always follow bear markets—and experiencing the latter needn’t prevent you from reaching your investing goals. So don’t get caught up trying to identify market inflection points with precision. Instead think longer term, focusing on what you want your money to provide for you in the future.

Finally, mistakes come with the territory, and every investor makes them. Rather than beat yourself up, view them as learning opportunities that will make you a better investor going forward. During rough market periods, perspective and levelheadedness are your best allies."

MY COMMENT

The VAST MAJORITY of investors are actually long term investors. Think about all the 401K and IRA accounts. Add in all the retail investors that invest long term in taxable accounts and you have the majority of investors. The number of short term traders in comparison is.....minuscule.

YET.....day after day the financial media focuses on nothing but short term markets, short term events, short term strategies, gossip, drama, turmoil, politics, etc, etc, etc. In other words......they dont care about YOU. It is all about.....THEM.

I always say......investing is SIMPLE. All you have to do is invest in a nice passive index like the SP500 and follow the above steps. Doing this you will BEAT the majority of active investors......the vast majority.

BUT......your brain will mess with you......your human brain and emotions will screw you.

This is why I use the simple RULE of 72's in my daily thinking. Every time I make an investment I am considering what that money will grow to using that rule. It is much easier to defer the use of that money short term when I see how much it will grow to over time. ALL is takes is a little bit of.......DISCIPLINE.......and concern for your and your families future.

 

We are NOW seeing the impact of the FED policies on the housing markets.....although......I dont think this headline is accurate since I remember rates being at or above 6% not too long ago........whatever.

Housing: Mortgage rates breach 6% for first time since 2008

https://finance.yahoo.com/news/housing-mortgage-rates-breach-6-percent-140013849.http

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

"Mortgage rates surged past 6% this week, the highest level since November 2008, worsening already rampant affordability concerns.

The rate on the 30-year fixed mortgage jumped to 6.02% from 5.89% the week prior, according to Freddie Mac, putting the average rate 2.80 percentage points higher than the start of the year.

As high borrowing costs and tight inventory levels continue to sap affordability to three-decade lows, inflation-struck buyers are no longer scrambling to close a deal. The few who remain in the market are using their newfound bargaining power to leverage pricing or repairs, further diminishing seller confidence.

“We have a fairly abrupt change in the market this year in terms of both infrastructure, certainly home prices, and the affordability equation changed appreciably from where we began the year to where we are right now,” Keith Gumbinger, vice president of HSH.com, told Yahoo Money. “We're kind of in a period of adjustment right now.”
Higher rates slump purchase demand

Demand for mortgages has remained at a 22-year low since the end of August, according to the Mortgage Bankers Association’s survey for the week ending Sept 9, as purchase and refinance activity continued to decline.

Purchase application volume made a slight gain of 0.2% from the previous week — as more first-time homebuyers opted for government-backed home loans that require smaller down payments — but overall purchase activity is 29% lower than a year ago.

That small increase has been overshadowed by the sharp plunge in purchase applications, MBA vice president of communications, Adam DeSanctis, told Yahoo Money, which continue to be “weighed down by weaker affordability conditions and higher rates.”

High home prices and tight inventory levels have pushed affordability to its worst level in 37 years, mortgage technology and data provider Back Knight reported last week. Although home price growth has softened in recent months, they remain out of step with the income levels required to afford a monthly mortgage payment for the median home price.

At last week’s 30-year rate of 5.89%, the buyer of a median-priced home is looking at a monthly payment of $2,100, a 66% jump from last year, according to Realtor.com.

“The record low interest rates that we’ve seen over the last two and a half years have really allowed home price growth to outpace income growth,” Andy Walden, recently told Yahoo Money. “In this affordability landscape it would take a combination of a 40% rise in incomes, roughly a three percentage point decline in 30-year rates, or a 30% pullback in home prices.”

Sellers scramble to close deals

As buyers reassess their plans, home sellers are growing more anxious about their prospects.

After rates surged this past week, the share of sellers slashing their asking prices continued to climb. Approximately 11% of homes for sale registered a price cut in August, Realtor.com data showed, up 19.4% year over year and closing in on average 2017 to 2019 levels.

A separate study by Redfin showed that 35% of homes sold above list price, down from 49% a year ago.

The median home price for active listings also fell to $435,000 in August, according to Realtor.com, down from $449,000 the month prior and June’s record high of $450,000. The month-to-month decline was the sharpest decline registered in six years, still prices remain 14.2% up from a year ago.

That’s too much for some sellers, who are pulling their listings from the market. The number of freshly listed homes declined 13.4% from a year ago in August, Realtor.com said, and were down in 42 of the 50 largest markets.

A Fannie Mae confidence index also showed that the percentage of sellers who say it's a bad time to sell increased from 27% in July to 35% in August.

“It's kind of a two way street, confidence overall hit a new record low in September, that was mainly driven by home sellers feeling a bit more pessimistic about housing conditions and selling opportunities,” Mark Palim, deputy chief economist for Fannie Mae, told Yahoo Money. “They're no longer selling houses at the top market value as they were just a few months ago.”"

MY COMMENT

Thanks to the FED......mortgage rates are way up and going higher. We are also seeing the housing markets start to collapse in some local areas. Of course it is all......local, local, local.

This is another BIG psychological hit to average people......and.....a potential big hit to net worth of many people. Obviously PSYCHOLOGY plays a big role in the economy.......and this will have a big impact going forward.

Very desirable markets will probably stay strong and actually see year over year gains in price going forward. It is still happening here where I live......but......available homes, number of sales, market activity, etc, etc, etc, will all take a hit even if prices dont.

AND......no doubt.....rates will go up from here.

 

The markets have now turned MIXED......(edit)......make that RED.

Stock market news live updates: Stocks rise as bevy of economic data, corporate news roll in

https://finance.yahoo.com/news/stock-market-news-live-updates-september-15-2022-114658965.html

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

"U.S. stocks rose in back-and-forth trading Thursday as a flurry of corporate headlines held investor attention over any moves from the major averages.

The benchmark S&P 500 climbed 0.2%, while the Dow Jones Industrial Average added roughly 90 points, or about 0.3%. The technology-heavy Nasdaq Composite ticked up 0.1%. The moves come after a modest rebound on Wednesday from the stock market's worst day since June 2020.

On the corporate side, "buy now, pay later" companies were closely-watched amid news the U.S. Consumer Financial Protection Bureau (CFPB) will start regulating the delayed payment industry over concerns their offerings financially harm consumers. Shares of Affirm (AFRM), a leader in the space, fell more than 3%.

Elsewhere, Adobe (ADBE) announced plans for a $20 billion acquisition of online design startup Figma in order to expand its lineup of hybrid-work-friendly platforms. Shares of Adobe tanked more than 13%.

In economic data, initial jobless claims fell for a fifth-straight week to the lowest reading since May. Filings for first-time unemployment insurance totaled 213,000 in the week ended Sept. 10 from 222,000 in the prior week, the Labor Department said Thursday. Economists called for 227,000 claims, according to consensus estimates compiled by Bloomberg.

Meanwhile, data from the Commerce Department showed consumers kept up spending in August despite continued pressures from inflation. Retail sales unexpectedly increased 0.3% last month after a downwardly revised 0.4% decline in July.

In the bond market, the benchmark U.S. 10-year Treasury note climbed above 3.45%, and the 2-year Treasury teetered past 3.8% after hitting a 15-year high on the heels of shock August inflation data earlier this week.

Last month’s Consumer Price Index (CPI) showed prices rose a more-than-expected 8.3% over last year, triggering a meltdown across U.S. equity markets as investors faced the reality that more combative central bank policy will be necessary to tame inflation.

Economists at Bank of America said Wednesday in a note that Federal Reserve officials are likely to warn market participants that risks of a hard landing are rising following their policy-setting meeting next week.

“This will likely come through projections that show less growth, higher unemployment, and a more restrictive policy rate stance,” BofA strategists led by Michael Gapen said. “While the Fed is still likely to view a soft landing as a modal outcome, the window appears to be narrowing.”

The CME FedWatch Tool Thursday morning showed markets were pricing in a nearly 30% chance the Federal Reserve will raise interest rates by a full percentage point next week as inflation shows signs of becoming entrenched in the U.S. economy.

Cryptocurrency markets were front and center Thursday after Ethereum completed its highly-anticipated “merge.” a technological shift to a more energy-efficient method of how tokens are minted. Ethereum (ETH-USD) traded just under $1,600 Thursday morning, while bitcoin (BTC-USD) held above $21,000.
Meanwhile, oil prices slipped, continuing a volatile stretch for energy markets. West Texas Intermediate (WTI) crude oil fell 1.6% to $87.06 per barrel, erasing Wednesday’s gain, while Brent crude oil futures dipped 1.5% to $92.67 per barrel."

MY COMMENT

So...short term we are seeing increasing or continued inflation in spite of falling oil prices. so much for the argument that OIL was causing much of the issue.

In addition the very short term jobless claim data and retail sales data mentioned above is NOT a good indicator of the FED backing off any time soon.

Of course......the odds of the FED pulling off a soft landing.....is about the same as YOU seeing a unicorn today in your back yard. (Although i did see a number of deer go past my back fence a few minutes ago in the wild Hill Country area behind my house)

Add in the continued TOTALLY SCREWED UP world economy, supply chain issues, etc, etc, and you have the current short term investing environment. ACTUALLY.....it is probably a miracle that the markets are doing as well as they are in the face of all that is going on. Add in a total lack of leadership here in the USA and all the political issues impacting the country, states, and cities......all of which SIGNIFICANTLY impact the markets and investors......if you want to have an even more negative view.

Considering everything in the today.....it is NOT surprising that the markets today are now strongly in the RED.....at this moment.

All I can say is......I continue to be fully invested for the long term as usual.

 

We are in the middle of an old fashioned BEAR MARKET. I doubt that we will see another BULL MARKET for at least 6-24 months. There is no way to predict when this will end.....it will only be clear in hindsight.

I suspect that the majority of investors have NEVER seen a BEAR MARKET during their investing lives. We have STILL NOT seen old fashioned CAPITULATION.

I do continue to believe that we have seen the bottom....a soft bottom......but that does not mean the markets will quickly rebound. It is not unusual for a market in this situation to LINGER for months.....if not a year or more.....before the market direction turns BULL MARKET.

As a market comment.....not a political comment.....I will say I believe that the greatest danger that we will have to simply live with the current market conditions.......FOR ANOTHER TWO YEARS....... is going to be GOVERNMENT. It is distracted, out of touch, and does not care about taking the steps necessary to save or restore the economy. Having lived through the Jimmy Carter era......I know very well the impact that government can have on the economy.....it was a disaster for investors and the economy. (yes, I voted for Jimmy Carter)

I was glad to recently see that one of my kids and their spouse is taking the right approach to this situation. I had noticed that they were totally scrimping on everything lately. I was surprised since they have a high combined income. I found out they are squeezing every penny they can to put the money into the markets. During this bear market they are trying to PILE as much money as possible into the markets......every month. They are focused on how investing every penny NOW.....will BOOST their returns and gains going forward. They see what is happening now as a historic opportunity.....the longer it lasts the better. They are being helped in their plan by the fact that their kid just started school this year so they are saving about $1000 per month in day care and pre-school. All of that money is going into the markets every month. Of course......one of them is a financial professional and the other works in a semi-related business.....so they understand long term investing and are able to stay very unemotional about the whole thing.

My other kid and their spouse.....continue to put $1000 per month into the SP500 Index......even though they are both under an AMAZING government pension plan.

BOTTOM LINE....you can see what is going on right now as a negative.....or.....as a positive opportunity....especially if you are young.