The Long Term Investor

My two cents on the list above by Zukodany on the BIG CAP giant companies.

I would NOT include Netflix or Facebook.

Facebook is in turmoil. They have been abandoned.....for the most part.....by young users. They are now more often than not the home of aging baby boomers and older prople. As to the ONLY thing they are counting on to save them......Metaverse......it is a total joke. A bunch of simplistic cartoon figures in a third rate animation environment.

As to Netflix.....I admit I dont follow them.....but just off the cuff....I dont see it.

 

HERE.....is some of what we will be seeing this week.....as we move forward toward the final three months of the year.

The Fed-induced sell-off may not be over: What to know this week

https://finance.yahoo.com/news/stoc...ve-meeting-rate-hike-september-163807190.html

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

"The S&P 500 could retest its June low in the week ahead as equity markets endure a brutal bout of selling spurred by fears the Federal Reserve’s inflation fight may cause a recession.

A move by the U.S. central bank to lift interest rates by 75 basis points for the third straight time on Wednesday while signaling more sizable hikes were likely renewed worries among investors that a hard landing is imminent – particularly as monetary policymakers around the globe followed suit in recent days.

“The chances of a soft landing are likely to diminish," Fed Chair Jerome Powell said in a speech following the policy announcement. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”

U.S. stocks plunged Friday, with the major averages logging losses in five of the six last weeks. The Dow Jones Industrial Average was down roughly 4% for the week, hitting a 2022 low after dipping into bear market territory during the session. The benchmark S&P 500 shed 4.6% over the same period, teetering near its June 16 low of 3,666.77. The major average closed at 3,693.23 on Friday. And the technology-heavy Nasdaq Composite posted a weekly loss of roughly 5.1%.

Recessionary worries also extended beyond equities. The rate-sensitive 2-year Treasury note spiked above a fresh 15-year high of 4.2% on Friday, soon after the 10-year Treasury yield topped 3.7%, the highest since 2011. In currency markets, the U.S. dollar index surged to the highest since May 2002 and in commodities, oil prices plunged below $80 to an eight-month low.

Bank of America’s Mark Cabana likened current market conditions to those of March 2020, when the COVID-19 pandemic upended the global economy – but without a policy backstop.

“Central banks are not helping,” he said in a Friday note. “The market knows central banks will hike until something breaks.”

“The Fed is hiking at the fastest pace in recent memory with maximum uncertainty on the macro outlook,” Cabana added. “To us, this seems like driving at 75 mph but not knowing which way the road will turn – an accident seems inevitable.”

Investors will have a hefty docket of economic releases to mull in the coming week, including the latest gauges on PCE inflation – the Federal Reserve’s preferred inflation measure – durable goods orders, new home sales, and consumer confidence. The third estimate of gross domestic product (GDP), the broadest measure of economic activity, is also due out.

Meanwhile, Wall Street is also buckling up for what is expected to be a challenging earnings season filled with economic warnings and downward guidance revisions from companies.

“We’re of the view that 2023 earnings estimates have to continue to decline,” a note outlining a discussion between Baird’s Ross Mayfield and Ryan Grabinski said. “We have our 2023 recession odds at about 50% right now, and in a recession, earnings decline by an average of about 30%.”

“The consensus 2023 earnings estimate has only come down 3.3% from its June highs, and we think those estimates will be revised lower, especially if the odds of a 2023 recession increase from here.”

Of S&P 500 companies that held earnings calls from June 15 through Sept. 8, 240 cited the term “recession” – the highest number citing the term since at least 2010, and well above the five-year average of 52, according to data from FactSet research.

Several key earnings announcements are on top in the coming week, with headliners like Bed Bath & Beyond (BBBY), Nike (NKE), Micron Technology (MU), and Rite Aid (RAD) set to report."

"Economic Calendar
Monday: Chicago Fed National Activity Index, August (0.27 during prior month), Dallas Fed Manufacturing Activity Index, September (-12.0 expected, -12.9 during prior month)

Tuesday: Durable goods orders, August preliminary (-0.1% expected, -0.1% during prior month), Durables excluding transportation, August preliminary (0.3% expected, 0.2% during prior month), Non-defense capital goods orders excluding aircraft, August preliminary (0.2% expected, 0.3% during prior month) Non-defense capital goods shipments excluding aircraft, August preliminary (0.5% during prior month), FHFA Housing Pricing Index, July (0.1% expected, 0.1% during prior month), S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, July (0.20% expected, 0.44% during prior month), S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, July (16.90% expected, 18.65% during prior month), S&P CoreLogic Case-Shiller U.S. National Home Price Index (17.96 during prior month), Conference Board Consumer Confidence, September (104.3 expected, 103.2 during prior month), Conference Board Present Situation, September (145.4 during prior month), Conference Board Expectations, September (75.1 during prior month), Richmond Fed Manufacturing Index, September (-11 expected, -8 during prior month), New Home Sales, August (500,000 expected, 511,000 during prior month), New Home Sales, month-over-month, August (-2.2% expected, -12.6% during prior month)

Wednesday: MBA Mortgage Applications, week ended Sept. 23 (3.8% during prior week), Advance Goods Trade Balance, August (-$88.5 billion expected, -$89.1 billion during prior month, revised to -$90.2 billion), Wholesale Inventories, month-over-month, August preliminary (0.5% expected, 0.6% during previous month), Retail Inventories, month-over-month, August (1.1% during prior month), Pending Home Sales, month-over-month, August (-0.8% expected, -1.0% during prior month), Pending Home Sales NSA, year-over-year, August (-22.5% during prior month)

Thursday: Initial Jobless Claims, week ended Sept. 24 (220,000 expected, 213,000 during prior week), Continuing Claims, week ended Sept. 17 (1.379 million during prior week), GDP Annualized, quarter-over-quarter, 2Q third (-0.6% expected, -0.6% prior), Personal Consumption, quarter-over-quarter, 2Q third (1.5% expected, 1.5% prior), GDP Price Index, quarter-over-quarter, 2Q third (8.9% expected, 8.9% prior), Core PCE, quarter-over-quarter, 2Q third (4.4% expected, 4.4% prior)

Friday: Personal Income, month-over-month, August (0.3% expected, 0.2% during prior month), Personal Spending, month-over-month, August (0.2% expected, 0.1% during prior month), Real Personal Spending, month-over-month, August (0.2% expected, 0.2% during prior month), PCE Deflator, month-over-month, August (0.1% expected, -0.1% during prior month), PCE Deflator, year-over-year, August (6.0% expected, 6.3% during prior month), PCE Core Deflator, month-over-month, August (0.5% expected, 0.1% during prior month), PCE Core Deflator, year-over-year, August (4.7% expected, 4.6% during prior month), MNI Chicago PMI, September (51.8 expected, 52.2 during prior month), University of Michigan Consumer Sentiment, September final (59.5 expected, 59.5 prior)

PCE Deflator, month-over-month, May (0.7% expected, 0.2% during prior month), PCE Deflator, year-over-year, May (6.4% expected, 6.3% during prior month), PCE Core Deflator, month-over-month, May (0.4% expected, 0.3% during prior month), PCE Core Deflator, year-over-year, May (4.8% expected, 4.9% during prior month), MNI Chicago PMI, June (58 expected, 60.3 during prior month)"

"Earnings Calendar
Monday: No notable reports scheduled for release.

Tuesday: Blackberry (BB), Cal-Maine Foods (CALM), Cracker Barrel (CBRL), Jabil (JBL)

Wednesday: Cintas (CTAS), Jefferies (JEF), MillerKnoll (MLKN), Paychex (PAYX)

Thursday: Bed Bath & Beyond (BBBY), Micron Technology (MU), Nike (NKE), Carmax (KMX), Rite Aid (RAD)

Friday: Carnival (CL)"

MY COMMENT

Looking forward to seeing the NIKE earnings on Thursday.

We also have a week filled with economic data.....so no doubt......there will be MUCH media speculation and parsing of the data....with the usual negative bias.

We are basically BACK AT the prior June lows. We are basically.....in recession and have been for months. The FED......out of control.

But...what is new, we have been dealing with these SAME issues all year.

 

As to this week and where the markets are headed over the next three months to year end......I am checking my MAGIC 8 BALL for the answer.

 

I am getting a bit of a "feeling" that the negativity is growing. I am hearing more and more of the "professionals" being critical of the FED and the markets. The predictions of a hard landing, a recession, an extended downturn are increasing.

I consider that a good thing. We need to reach a bottom and WRING the positivity out of the markets. That is the point where the markets will turn based on the businesses that make up the markets being undervalued compared to earnings potential.

I dont care if it is a month from now or two years from now.....any free money I get is going right into the stocks and funds that I hold. At this point.....we are far enough down that I am willing to take any future drops in the market in order to be fully exposed going forward.

 

Markets are open for business today. A mixed market so far with the Dow in the red and the SP500 and NASDAQ in the green.......a NORMAL day in the neighborhood.

 

I like this little article.

Luck & Timing in the Housing Market

https://awealthofcommonsense.com/2022/09/luck-timing-in-the-housing-market/

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

"A little less than one year ago I asked Are U.S. Housing Prices Becoming Unaffordable?

At the time, the Case Shiller National Home Price Index had just hit a new all-time high for year-over-year price gains of around 20%.

That meant monthly mortgage payments for median single family home prices were reaching all-time highs:


But if you adjusted those monthly payments for inflation things didn’t look so bad:


Adjusted for low interest rates and inflation, mortgage payments were much higher in the 1980s and 1990s.

But it was low mortgage rates that really helped that affordability. Here’s what I said at the time:

The one variable that could throw a wrench into this equation would be higher mortgage rates.

In my example from above, a $308k house at 5% mortgage rates would be a monthly payment of $1,322. A $367k house would be $1,576/month. Those are increases of around $300/month versus 3% mortgage rates.

Rising rates are even more impactful than rising prices on your monthly payments.

If rates were to rise substantially, you would expect housing prices to fall, at least in theory.

The worst-case scenario for would-be first-time homebuyers would be for mortgage rates to rise while prices don’t fall. Demand would surely soften if rates rise past a certain threshold but I have no idea what that threshold is. And there is no guarantee housing prices would immediately fall if rates do rise.

Well, mortgage rates have risen, more than doubling from those levels to more than 6%.


Let’s look at these charts just one year later. The median mortgage payment is now off the charts from a continued increase in home prices and much higher mortgage rates:


Look at that blow-off. Not good for anyone looking to buy their first home.

Now let’s see how things look on an inflation-adjusted basis:


This is the worst level of unaffordability we’ve seen since the late-1980s and it happened in the blink of an eye.1


The homeownership rate in the United States is around two-thirds:


If you’re one of the lucky people in this group who purchased a home pre-2022 and locked in a rate of 3% or lower, these affordability numbers don’t matter to you (unless you plan on trading up).


And it is luck if you happened to buy or refinance in recent years.

Let’s say you’re an older millennial who purchased a home sometime between 2015-2020.

The value of your home is probably up 40-60%. Your mortgage rate is around 3% range. That means the Fed’s short-term borrowing rate is now higher than your fixed rate mortgage, which just so happens to be one of the best inflation hedges you could ask for. Your payment is fixed and you’re much wealthier from the boom in home prices since 2020.

But what if you’re a younger millennial or Gen Z person who lives in a big city or missed the window to buy a house?

Your rent is rising at a fast clip. It is now much more expensive to buy a home and more or less unaffordable for many young people. Your best bet is buying a place now with a high mortgage rate and hoping the Fed lowers rates after they send us into a recession so you can refinance. Pick your poison.


If you happened to buy at lower prices with lower rates you’re not a genius. You got lucky.

And if you didn’t buy at lower prices with lower rates you’re not an idiot. It was a case of bad luck.

Unfortunately, luck permeates much of your financial experience.

I ran the numbers on a $10k annual investment into the S&P 500, adjusted for inflation, and the results are all over the map:


The difference between the best and worst outcome had nothing to do with the individual dutifully saving money and everything to do with when they were born and began saving.

If you had the tailwind of the 1950s, 1980s, 1990s or 2010s bull market at your back, you did really well in the stock market.


If you happened to start investing in the 1930s or lived through the 1970s or 2000s, not so much.

Unfortunately, a lot of what happens with your financial life is out of your control.

You have no control over what happens in the stock market, the housing market, bond market or commodities market. You cannot control inflation or interest rates or tax rates or the Fed or what kind of financial situation you’re born into.

You can control your savings rate, asset allocation, diversification and work ethic.


It might not seem fair but sometimes you just have to play the cards you’re dealt."

MY COMMENT

YEP.....there is a lot of luck and timing involved in how someone does in housing or the stock markets. AND....I am NOT talking about market timing as an investment strategy. I am just talking about PASSIVE LUCK.

The primary way to deal with this is through a lifetime of long term investing. Stretching an investing habit over 30-50 years of consistent saving and investing is the ONLY way to smooth out all the short and medium term bumps and bruises.

In order to do that you have to actually....be in the markets. Unfortunately you have to be invested and sit through the bad times as well as the good times. Right now we are in the bad times....especially for any investors under age 40 that have never been involved in a REAL bear market.

 

Here is one take on EARNINGS and the current markets from Schwab.

Earnings: Trampled Under Foot?

https://www.schwab.com/resource-center/insights/content/earnings-trampled-under-foot?cmp=em-QYC

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

"In a few weeks, third-quarter earnings season begins, with much hand-wringing about whether this will be the season when economic weakness translates to earnings weakness. We believe the weakness in expected earnings growth is early in its trip to an ultimate negative (year-over-year decline) destination. Last week's FedEx news of an expected earnings implosion and the company's removal of all forward-looking guidance is a likely canary.

2Q22 recap

Before getting to the outlook, a recap of second-quarter earnings season is in order, since the official books are just closing now. S&P 500 earnings were up more than 8% in the second quarter, but excluding the Energy sector, they were down more than 2%. Shown in the chart below, the "beat rate" (percentage of companies that reported better-than-expected earnings) was more than 77%—above the long-term average of 66%, but below the prior four-quarter average of nearly 81%. Also shown is the sharp deceleration in the percent by which earnings beat expectations—from more than 20% five quarters ago to 5% during this year's second quarter (about half the prior four-quarter average of nearly 10%).

Lower beats


Source: Charles Schwab, I/B/E/S data from Refinitiv, as of 9/16/2022.

Stocks of companies beating estimates were rewarded on the day of their earnings' release, as shown in the blue bars in the chart below, but at a lower rate than the prior two quarters. Conversely, stocks of companies missing estimates were punished to a more significant degree than anything seen over the past five years.

Misses getting pummeled


Source: Charles Schwab, Bloomberg, as of 9/16/2022. Past performance is no guarantee of future results.

Revisionist future

Looking ahead, the estimated earnings growth rate for S&P 500 earnings in this year's third quarter is 5%; if the Energy sector is excluded, it's expected to be down nearly 2%. As shown in the chart below, the trajectory for earnings estimates for the remaining two quarters of this year and the first two quarters of next year has been decidedly down since earlier in the year. Estimates for the third quarter have fallen from more than 11% at their peak in June, while fourth-quarter estimates have been cut by more than half from their peak at the start of the year. For the first half of next year, estimates are also well below where they were earlier this year; although they did pick up in August before leveling out again.

Weakening path for estimates


Source: Charles Schwab, I/B/E/S data from Refinitiv, as of 9/16/2022. Forecasts contained herein are for illustrative purposes only, may be based upon proprietary research and are developed through analysis of historical public data.

As shown in the chart below, there has been a significant deceleration in the percentage of S&P 500 stocks with positive three-month earnings revisions. The last slide as significant as this year's started in 2018 and did not find a bottom until the retreat from the lockdown era of the pandemic in 2020. We believe this chart gets worse before it starts to improve.

Fewer positive revisions


Source: Charles Schwab, Bloomberg, as of 9/16/2022.

Better or worse matters more than good or bad

We all know earnings growth is a key underpinning of stock prices, but with important nuances in terms of the how and why. As with most economic and/or earnings data, trend tends to matter more than level ("better or worse matters more than good or bad"). As shown in the chart below, the year-over-year rate of change in S&P 500 earnings growth (yellow bars) is directly tied to the year-over-year rate of change in the S&P 500, with the S&P's descent into negative territory often preceding earnings' descent into negative territory (2008 being an exception).

Weight of weakening earnings


Source: Charles Schwab, I/B/E/S data from Refinitiv, as of 6/30/2022. 4Q08's reading of -67% is truncated at -40%, 4Q09's reading of 206% is truncated at 80%, and 2Q21's reading of 96% is truncated at 60%. Past performance is no guarantee of future results.

One might think that high earnings growth rates would usher in strong stock market performance, but earnings are (obviously) reported after the fact, while stocks are a discounting mechanism. Earnings growth was more than 32% at the start of this year (as of last year's fourth quarter), yet a bear market slide began only three days into this year. Shown in the table below is a full-history look at S&P 500 performance relative to four earnings growth-rate zones.

High earnings = lower returns


Source: Charles Schwab, ©Copyright 2022 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/. *Based on trailing 12-month earnings in accordance with GAAP (generally accepted accounting principles.). Past performance is no guarantee of future results.

Earnings growth of more than 20% has historically been accompanied by a barely positive annualized return of less than 2%; the best zone for stocks has historically been when earnings growth is between -20% and +5%. Perhaps no surprise is that the worst earnings zone for stocks is when earnings were imploding (worse than -20%). But what the trajectory of the data shows is that once earnings bottom and begin to accelerate, that's when the strongest market gains kicked in. Conversely, once earnings growth had surged to more than +20%, the market started to discount the inevitable turn down from peak levels.

What matters more than the growth rate of earnings is the percentage-point change in the growth rate of earnings. As shown in the table below, stocks had their best performance when the change in the growth rate was moving up by at least 11 percentage points (helping to explain last year's strong S&P 500 performance). Conversely, when the earnings growth rate was historically down by more than 18 percentage points (like now), stocks had their weakest performance (albeit positive).

Change in growth rate matters


Source: Charles Schwab, ©Copyright 2022 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/. *Based on trailing 12-month earnings in accordance with GAAP (generally accepted accounting principles.). Past performance is no guarantee of future results.

Taking stock of valuation

Earnings are, of course, a component of most valuation metrics—certainly P/E ratios ("multiples") of several varieties. One of the clear themes throughout this bear market has been the significant reduction in multiples—namely, those based on forward and trailing earnings. The widely followed forward P/E for the S&P 500 collapsed during the pandemic-induced bear market in early 2020, only to rebound swiftly—from slightly more than 13 at its March 2020 trough, to 27 in late 2020. Multiple expansion took a breather from there through 2021, only to fully reverse as the bear market kicked in at the start of 2022.

Valuation reset


Source: Charles Schwab, Bloomberg, as of 9/16/2022.

The reversal this year was not only swift, but quite severe given the S&P 500's forward P/E fell by 28% from the beginning of the year through mid-June. Most of that re-rating was driven by large-cap growth stocks, given they were trading at hefty multiples as the new year began. As inflation's heat contributed to expectations of more aggressive rate hikes by the Federal Reserve, longer-duration/higher-multiple stocks were hit due to the higher discount rate used to value future earnings. The weakness helped accelerate the market's losses, but also aided the strong countertrend rally that lasted from mid-June through mid-August, as some investors sought to pick up battered companies that were then trading at relative discounts.

Absolute vs. relative

Our note of caution on viewing multiples as attractive in an absolute sense today is twofold. First, forward earnings growth has not yet contributed to the market's drawdown in a significant way this year. That means the "E" in the forward P/E has increased, while the P/E itself has declined. Given our view that forward earnings estimates remain too lofty, there remains a risk that analysts and companies guide down and reduce their estimates. If that occurs, it will put upward pressure on multiples (all else equal, which of course is never the case with the stock market), making stocks look relatively less attractive from here.

Attractiveness is in the eye of the beholder, however. Shown in the heatmap table below, you can see that there are myriad valuation metrics that suggest the market is both egregiously overvalued and opportunistically undervalued. As we often joke, at most moments in time, we can find the most bearish and most bullish investor in a room, and hand them each a valuation metric from the table below that supports their view on the market.

Pick a metric, any metric


Source: Charles Schwab, Bloomberg, The Leuthold Group, as of 9/16/2022. Due to data limitations, start dates for each metric vary and are as follows: CAPE: 1900; Dividend yield: 1928; Normalized P/E: 1946; Market cap/GDP, Tobin's Q: 1952; Trailing P/E: 1960; Fed Model: 1965; Equity risk premium, forward P/E, price/book, price/cash flow, rule of 20: 1990. Percentile ranking is shown from lowest in green to highest in red. A higher percentage indicates a higher rank/valuation relative to history.

While many conclusions can be drawn from the table, we'll point out a few aspects worth noting in today's environment:

• Even though the S&P 500's forward and trailing P/Es have gotten crushed this year, they are still trading at relatively expensive levels relative to history.
• While the equity-risk premium models may be comfortably in the light green zones, they have moved increasingly (and quickly) to the right (more expensive) as bond yields have climbed higher this year.
• One may argue that the Rule of 20 has become increasingly important in today's environment, as inflation is still hovering near a 40-year high and weighing substantially on multiples. As such, that may indicate the market is still trading in an uncomfortably expensive zone.

Inflation has entered the discussion

Our goal in this writing is to reinforce that no one single valuation metric acts as the holy grail for determining whether the market is fairly valued. If anything, macro conditions often warrant a closer look at certain indicators. In today's environment of 40-year highs in inflation, more emphasis might be placed on the Rule of 20.

The "rule" simply states that the stock market is fairly valued when the sum of the S&P 500's forward (12-month) P/E and the year-over-year change in the consumer price index (CPI) equals 20. Evidenced by the mean-reverting nature of the metric going back to 1990, you can see in the chart below that there is some substance to that intuition. Yet, it's worth pointing out that there are different drivers of the sum when going back throughout history. In the late 1990s, the forward P/E was responsible for most of the gain, given CPI didn't even break through 4% year-over-year at its peak. Today is a much different story given CPI's 8.4% increase (as of August).

Play by the Rule of 20?


Source: Charles Schwab, Bloomberg, as of 8/31/2022. Rule of 20 (number at which dotted line is plotted) suggests, over the long term, the combination of the S&P 500's estimated forward 12-month P/E ratio and CPI year-over-year rate should revert to a sum of 20.

Another way to view the importance of inflation today is in the table below. Shown in the leftmost column are various ranges of the annual change in CPI. Moving to the right, you can see the S&P 500's average, lowest, and highest forward P/E in those ranges. Today's 8.5% CPI is consistent with an average forward P/E of 11.2, which is significantly lower than today's reading of 16.3. To be sure, that doesn't at all indicate that the market is set for an imminent collapse. As shown in the rightmost column, we have only been in the current CPI range for 3% of the time since 1958.

Inflation hits valuation


Source: Charles Schwab, Bloomberg, Standard & Poor's. 1958-8/31/2022. Numbers may not add up to 100% due to rounding.

Timing? Not so fast

The lack of a large sample size for inflation-related metrics underscores the difficulty in assessing market valuation at any given time. That especially holds true today, not only because of the inherent difficulty in seeing inflation's future path, but also because of its stubborn, slow decline. This should also serve as a reminder for investors that valuation is not (and has never been) a reliable near-term market-timing tool.
Returning to the widely followed forward P/E, as shown in the chart below, there is an incredibly weak relationship between its level and the S&P 500's performance one year later. In fact, there have been instances in which an eye-popping forward P/E above 25 preceded both a -20% decline and near 40% gain for stocks a year later.

No relationship status


Source: Charles Schwab, Bloomberg, 1958-8/31/2022. Correlation is a statistical measure of how two investments have historically moved in relation to each other, and ranges from -1 to +1. A correlation of 1 indicates a perfect positive correlation, while a correlation of -1 indicates a perfect negative correlation. A correlation of zero means the assets are not correlated. Past performance is no guarantee of future results.

While valuation analysis is a useful tool for assessing the market's attractiveness, we remain firm in the view that it depends on where investors place greater importance. As mentioned in the discussion around the heatmap table, investors who like to compare the stock market's yield to that of the bond market likely won't hesitate in saying stocks remain attractive today. Yet, investors who take issue with the rapid growth in multiples relative to the growth rate in the economy [market cap/gross national product (GNP)] may be less comfortable with the state of the market today.

In sum

Regardless of one's view, the indisputable reality today is that the Fed remains engaged in one of the most aggressive rate-hiking cycles in history. Confirmed by what we've seen this year, that has historically weighed on valuations. The added rub is that growth-heavy stocks represent a much larger portion of the market today compared to the last era with inflation running above 8%. If higher interest rates continue to dent those stocks' value, and earnings growth slows, there is less upside for profit margins.

This perhaps lends credence to the fact that it isn't precision around the magnitude of the decline in multiples that matters. Rather, it's the direction; and as of now, that continues to point downward…consistent with the downward trajectory of earnings growth estimates. At the mid-June lows, stocks were discounting a lot of negative news. Recent weakness clearly reflects still-hot inflation and a "don't fight the Fed" mentality. But still largely ahead is a further rerating of earnings estimates and likely continued volatility in stocks. Stay disciplined."

MY COMMENT

Yes....stay disciplined. Whatever your investing style or plan. If it works for you and makes you comfortable.....if it produces the returns that you want.....just do it.

 

THIS is actually good news.

Wall Street’s fear gauge hits highest level since June

https://www.cnbc.com/2022/09/26/wal...t-level-since-june-as-stock-rout-worsens.html

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

"A measure of fear in stocks just hit the highest level in three months amid mounting worries over rising rates, a possible currency calamity and a recession.

The Cboe Volatility Index, known as the VIX, jumped nearly 3 points to 32.88 on Monday, hitting its highest level since mid-June when the stock market last reached its bear bottom.

The VIX, which tracks the 30-day implied volatility of the S&P 500, hasn’t closed above 30 since June 16. The index looks at prices of options on the S&P 500 to track the level of fear on Wall Street.





The jump latest jump in the VIX also comes in the midst of currency market turmoil and the dollar continuing to climb to a 20-year-high. Investors started dumping risk assets as the Federal Reserve vowed to tame inflation with aggressive rate hikes, risking an economic slowdown.

The Dow Jones Industrial Average on Friday notched a new low for the year and closed below 30,000 for the first time since June 17. The S&P 500. capped its fifth negative week in six, falling 4.65% last week.

The Dow and the S&P 500 fell again in morning trading Monday.

With investor fears now reaching extreme levels occurring during the last bear market bottom, it could also be a sign that stocks are nearing a turning point this time."

MY COMMENT

This is part of the process of finding a market bottom. ALSO....extremely short term and hindsight data. Lets get it over with....crash the economy.....ramp up the pain.....and move on.

 

This is really good news. It is way past time that we abandoned CHINA as a manufacturing and business partner. this is just a drop in the bucket.....but at least it is a start.

Apple begins making the iPhone 14 in India, marking a big shift in its manufacturing strategy

https://www.cnbc.com/2022/09/26/apple-starts-manufacturing-the-iphone-14-in-india.html

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

"Key Points

• Apple on Monday said it is assembling its flagship iPhone 14 in India as the U.S. technology giant looks to shift some production away from China.
• Apple’s main iPhone assembler, Foxconn, is manufacturing the devices at its Sriperumbudur factory on the outskirts of Chennai.
• Apple has been manufacturing iPhones in India since 2017 but these were usually older models. With the iPhone 14, Apple is producing the latest model in its lineup at the device’s launch.

Apple said Monday it is assembling its flagship iPhone 14 in India as the U.S. technology giant looks to shift some production away from China.

“The new iPhone 14 lineup introduces groundbreaking new technologies and important safety capabilities. We’re excited to be manufacturing iPhone 14 in India,” the company said in a statement.


Apple’s main iPhone assembler, Foxconn, is manufacturing the devices at its Sriperumbudur factory on the outskirts of Chennai.

The Cupertino, California, giant has been manufacturing iPhones in India since 2017 but these were usually older models. This time with the iPhone 14, Apple is producing its latest model in India for the first time, close to the device’s launch. Apple introduced the iPhone 14 earlier this month.

Apple will sell India-produced phones locally but also export them to other markets globally. Customers in India will begin receiving the locally manufactured devices in the next few days.

JPMorgan analysts said in a note this month that Apple will move 5% of its global production for the iPhone 14 to India by late 2022. Apple could also make 25% of all iPhones by 2025 in India, JPMorgan said.

Apple’s focus on manufacturing in India highlights the tech giant’s desire to diversify production away from China and boost customers in India, which is currently a small market for the company.

Apple still relies heavily on China for the majority of iPhone production.

But Beijing has persisted with a strategy of lockdowns to control Covid resurgences even as most of the world looks to open their societies. The zero-Covid policy has disrupted production at factories across China where lockdowns take place and highlighted some potential weak spots in Apple’s supply chain.

India has looked to boost local manufacturing of electronics through incentives."

Meanwhile, Apple has been looking to increase sales in India, the world’s second-largest smartphone market. Apple had just a 3.8% market share in India last year, as lower cost competitors such as Samsung and China’s Xiaomi continue to dominate, according to Counterpoint Research.

However, Apple was the top-selling brand in the ultra-premium segment, which are phones over 45,000 Indian rupees ($552), in the second quarter of this year. That’s thanks to strong momentum of its previous generation iPhone 13 models.

The iPhone 14 starts at 79,900 rupees ($980).

“Apple has a strong momentum in India. India is among the 20+ countries in the world where the premiumization trend has just started,” Tarun Pathak, research director at Counterpoint Research, told CNBC."

MY COMMENT

This is good news in terms of manufacturing and also in terms of TARGETING one of the largest countries in the world and a relatively untapped market. More American companies need to follow both of these practices.

It is absolutely RIDICULOUS that we continue to prop up the economy of our ENEMY and the MOST BRUTAL DICTATORSHIP in the world by giving them our manufacturing business. As a country....and especially business.....we are being SCREWED by china.

 

Markets jumping around as usual. STILL a mixed day but we are backing off from earlier highs in the SP500 and NASDAQ.

SO.......I went right to my old reliable market indicator....the MAGIC 8 BALL. I did three views of the ball just to get a good average of what is going on today and into the near future for the markets. Here are the extremely helpful responses:

"It is decidedly so"

"Better not tell you now"

"Reply hazy try again"

OK....got it....I will take appropriate action with my account today. SO.....I remain fully invested for the long term as usual.

Next week I will put up some SHOCKING DATA.....on using a "mojo hand" as an investing tool.

 

Buying and selling incrementally is NOT a lesson I have learned.

I follow the academic research that shows conclusively that buyin...... all in.....when you have the funds beats dollar cost or incremental investing of funds into the markets.

As to selling.....since I ONLY sell when a company meets the criteria that I no longer wish to hold it for the long term......at that point I simply sell out the entire position. I dont want to market time by doing incremental selling......and.....since I very rarely take profits on my long term holds......when I sell it is because I have decided to liquidate a holding. So....I consider it a lateral move and simply sell all shares.......and.....put the money to work elsewhere immediately.

Otherwise I dont re-balance or sell....I let my winners (hopefully) run as they wish.

 

My NIKE reports this week on Thursday. Either they are the tail end of the past earnings quarter or they are the early bird on the next quarter that reports soon. I think they are the tail end.....not that it matters.

Nike is the next bellwether in focus after FedEx earnings whiff

https://finance.yahoo.com/news/nike-stock-in-focus-after-fedex-ford-earnings-whiffs-145050374.html

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

"If you thought FedEx laid a big fat egg with its earnings report last week, then brace yourself for Nike's fiscal first quarter earnings due out after the close of trading on Thursday.

There are a multitude of increasingly brutal headwinds facing major retailers, ranging from a global economic slowdown to bloated inventories bloated ahead of the crucial holiday season to ongoing supply chain inflation to demand weakness in China to the U.S. dollar being at fresh 20-year highs weighing on corporate profits.

These concerns have Wall Street analysts poised for a dose of gloom from mighty Dow component Nike later this week and a potential further sell-off in the stock (shares are already down 12% in the past month).

"We think there's going to be a really, really tough holiday," Barclays retail analyst Adrienne Yih said on Yahoo Finance Live. "And part of this is really about the forward 2023 purchasing behavior in the wholesale channel. Remember, Nike still has about 55% of its business in the wholesale channel even though they're making great strides in moving to direct-to-consumer. So that's sort of the crux in the near-to-medium term."

Longtime Morgan Stanley retail analyst Kimberly Greenberger added insight on Nike pre-earnings in a recent note:

• Price Target: $129 (lowered from $149)
  
• Rating: Overweight (reiterated)
  
• Stock price movement assumed: +37%
  

The "whisper numbers" on Nike's first quarter earnings may not be low enough, Greenberger hints — meaning many investors may be surprised negatively by the company's report and guidance.

"Taken together, we anticipate [selling, general, and administrative] conservatism and a stronger China bounce back are enough to offset North America/Europe weakness and gross margin pressure, enabling Nike to deliver $0.90 in 1Q23 EPS, roughly in-line with consensus at $0.92. And while Street sales/gross margin forecasts may prove optimistic, our investor conversations indicate the market is similarly anticipating softer 1Q23 revenue and gross margin trends, but in-line EPS. So the stock is likely already priced for this outcome."

Investors should expect a guidance warning from Nike, Greenberger's analysis suggests.

"To us, all of this increases the likelihood that Nike cuts its fiscal year guidance, and we subsequently trim our FY 2023 EPS forecast to $3.35 from $3.46 prior, at the low end of Nike's prior implied EPS guidance range (~$3.35-3.65). However, we caution that even our 10%-below-consensus EPS forecast does not contemplate a recession, and thus we see risk for further downside should a recession materialize in North America/Europe. Put simply, we see room Nike guides to an EPS outcome even below our revised $3.35 forecast. As it relates to positioning, investor guidance expectations appear mixed – some are braced for a cut (to ~$3.30 level, a touch below us), while others think Nike could reiterate prior guidance. This could lead to divergent stock reaction outcomes."

Nike's troubles could continue into next year.

"Based on the worsening macro backdrop/outlook, retail second quarter earnings results/mostly lowered fiscal year guides, our recent sportswear channel checks, as well as intra-quarter conversations with some of Nike's wholesale peers, we fear potential 1Q23 demand softness & higher promotional/discounting activity continues through at least calendar year end, and potentially into next year (depending on the inventory clean-up trajectory)."

Greenberger still likes Nike stock longer-term.

"Nike is in the early innings of transition from a wholesaler to a direct-to-consumer brand. Success would make it one of few to benefit from the shift to eCommerce (~20% of ‘21 sales). Its direct-to-consumer business (~37% of 2021 sales) is igniting its next phase of margin-accretive revenue growth, driving a high-teens five-year EPS compound annual growth rate. Nike also stands to benefit from advancing global consumer activewear demand (due to the work-from-home induced preference for comfort oriented apparel/footwear and increased focus on health and wellness)

▪ Nike's strategic portfolio decisions, tech investments, and supply chain innovation also create long-term competitive advantages, and are further supported by an industry-leading balance sheet.""

MY COMMENT

Balance sheet.....what balance sheet. No one cares.....it is all about the short term financials right now. I have no clue how they will do.....but....in the current environment anything short of a HUGE earnings report will be demonized.

No doubt they will be cautious with their guidance....which means that the markets will punish them for a week or two. If I was a CEO right now....I would definately be cautious with guidance and downplay the expectations. I am sure they will do so.