The Long Term Investor

Markets have been steadily DETERIORATING today over the past hour. No doubt due to the Ten Year Treasury being UP in yield today by 0.74. It has been increasing over the past 30-45 minutes as the markets went more and more negative.

The Treasury markets are messed up......the daily irrational, oversize, moves we are seeing in the yields are unusual and concerning to the markets.

With what the FED has been doing or not doing for the past couple of year.......it shows that they are TOTALLY out of touch with the economy and financial conditions. They are LURCHING around based on monthly and even weekly news. They have created a HUGE MESS and as long as the same old people are in charge.....I dont see much chance that things will change.

Watching and reading about them GLEEFULLY celebrating and intentionally pushing the markets down....while people are seeing their life savings......temporarily......dwindle is very IRRITATING. The CONSTANT media appearances are WAY BEYOND anything I have seen in the past. This FED is really SCREWED UP.

AND.....I am saying this as a person that strongly believes that interest rates were way too low and needed to be normalized......and still believes that.

 

Speaking of the FED.

Stock market news live updates: Stocks fall as investors mull Fedspeak, await jobs report

https://finance.yahoo.com/news/stock-market-news-live-updates-october-6-2022-111702441.html

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

"U.S. stocks sank Thursday after a dramatic two-day rally that kicked off the quarter sputtered.

The S&P 500 and Dow Jones Industrial Average each dropped 0.8%, while the technology-heavy Nasdaq Composite fell by 0.7%. Meanwhile in the bond market, Treasury yields nudged higher, with the benchmark 10-year note above 3.77% and the rate-sensitive 2-year yield at 4.17%.

Investors weighed a batch of hawkish remarks from Federal Reserve officials Thursday morning. Minneapolis Fed President Neel Kashkari acknowledged that the risk of overshooting was present, as a lot of policy tightening still needs to work its way through the economy. Still, he asserted, he and his colleagues were "quite a ways away" from bringing down inflation.

Echoing that sentiment, Cleveland Fed President Loretta Mester said the U.S. is in an "unacceptably high" inflation environment.

On the commodities front, U.S. crude oil futures sustained a gain of more than 10% this week after OPEC+ on Wednesday approved its heftiest production cut since 2020 – of 2 million barrels a day – after U.S. officials tried and failed to lobby against the move.

"These higher oil prices certainly prevent gasoline prices from continuing their seasonal drop during the winter," Lipow Oil Associates President Andrew Lipow told Yahoo Finance Live on Wednesday. "The consumer at the gas pump is already going to be seeing the impact over the next couple of weeks."

Fresh data from the Labor Department showed a jump in the number of Americans filing for first-time unemployment insurance last week. Initial jobless claims rose sharply to 219,000 for the week ended Oct. 1 after sliding to 193,000, the lowest since April in the prior week. Economists called for 203,000 claims, according to consensus estimates compiled by Bloomberg.

Other recent economic data reflecting a larger-than-expected drop in job openings and sharp cooldown in manufacturing activity has stoked optimism the Federal Reserve may pivot on its policy tightening plans sooner than expected, but many on Wall Street remain skeptical the data has moderated enough to convince officials to scale back on rate increases.

On Tuesday, investors cheered on the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), which showed vacancies dropped 1.1 million to 10.1 million on the last business day of August. However, the ADP's private employment report showed the U.S. economy added 208,000 jobs in September, more than expected, and continuing a trend of upside surprises to labor market data.

“Prior to non-farm payrolls (NFP) this Friday and CPI next Wednesday, the market has been oscillating between the ‘hawkish Fed’ and ‘Fed pivot’ narrative,” analysts at JPMorgan said in a note Thursday, adding that other data points, including the ADP’s jobs reading, “proves the economy still remains strong and therefore weakens the hope of a near-term pivot from the Fed.”

The Labor Department’s September jobs report due out at 8:30 a.m. ET on Friday morning will prove to be the most important release for investors. Economists expect nonfarm payrolls rose by 260,000 last month, per the latest estimates from Bloomberg.

“Equity bulls would need a print around 100,000 to see the market alter its Fed expectations,” JPMorgan noted."

MY COMMENT

I have NEVER seen a FED like this FED. I have also NEVER seen a government totally disconnected from what the FED is doing like this government......of any party. They are NOT acting in concert in the slightest. As a result.....there is......rightly...no confidence in either one.

If this sort of disconnect continues it is going to be a very long 2+ years for investors and the economy.

 

To continue with the current theme.

Treasuries Liquidity Problem Exposes Fed to ‘Biggest Nightmare’

https://finance.yahoo.com/news/us-treasuries-liquidity-problem-exposes-100000072.html

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

"(Bloomberg) -- The latest bout of global financial volatility has heightened concerns about regulators’ continuing failure to resolve liquidity problems with US Treasuries -- the debt that serves as a benchmark for the world.

It’s getting harder and harder to buy and sell Treasuries in large quantities without those trades moving the market. Market depth, as the measure is known, last Thursday hit the worst level since the throes of the Covid-19 crisis in the spring of 2020, when the Federal Reserve was forced into massive intervention.

With rising risks of a global recession, escalating geopolitical tensions and the potential for further defaults by developing nations -- not to mention ructions in a developed economy such as the UK -- investors may not be able to rely on Treasuries as the reliable haven they once were.

“We have seen an appreciable and troubling deterioration in Treasury market liquidity,” said Krishna Guha, head of central bank strategy at Evercore ISI. Regulators “really haven’t delivered yet any substantial reforms,” he said. “What we are seeing at the moment is a reminder that the work is really important.”

When the Treasuries market broke down amid a panicked rush into dollar cash in March 2020, the Fed swooped in as buyer of last resort. And while it now has a backstop facility allowing the exchange of Treasuries for cash, volatility, if extreme enough, could still force the Fed into action, observers said.

That’s particularly awkward now, when policymakers are not only raising interest rates but actively shrinking the portfolio of Treasuries. So-called quantitative tightening is supposed to be playing an “important role” in tightening monetary policy, as part of the central bank’s battle to contain inflation.

“The biggest nightmare for the Fed now is that they have to step in and buy debt,” said Priya Misra, global head of rates strategy at TD Securities. “If the Fed has to step in -- when it’s in conflict to monetary policy -- it really puts them in a bind,” she said. “That’s why I think regulators need to fix the market structure.”

The Treasury Department is working on an initiative to enhance transparency in the trading of US government debt, seen as one step that could encourage dealers and investors to boost volumes. News on that front may come at a Nov. 16 annual market-structure conference.

‘Lifeblood’ Importance

But the outlook for bigger reforms, such as the Fed relaxing banks’ capital requirements connecting to how much Treasuries they hold, remains unclear. An independent panel this past summer criticized regulators for the slow pace of their efforts.

“I do think the official sector is moving, but there’s a lot more to do,” said Darrell Duffie, a Stanford University finance professor who served on that panel.

Duffie, who is currently seconded to the Federal Reserve Bank of New York, added, “The Treasury market is the most important securities market in the world and it’s the lifeblood of our national economic security. You can’t just say ‘we hope it will get better’ you have to move to make it better.”

For now, things are not better, with what would once be viewed as outsized daily yield swings becoming commonplace. A Bloomberg index of liquidity levels, which measures on average how far yields are away from where fair-value models say they should be, shows conditions have deteriorated.

Fed’s Take

“Market liquidity is definitely lower,” New York Fed President John Williams acknowledged this week. But he added, “It’s still functioning.”

Fundamental to the structural challenge is the surge in supply -- Treasury debt outstanding has climbed by $7 trillion since the end of 2019. And big financial institutions haven’t been as willing to serve as market-makers, burdened by the so-called supplementary leverage ratio, or SLR, which requires that capital be put against such activity (as well as reserve holdings).

Fed Governor Michelle Bowman encouraged some observers with remarks this week signaling openness to adjusting the SLR. But Bowman’s not in the key role overseeing such a move, which would fall to Michael Barr, the newly installed vice chair for supervision.

Josh Younger, JPMorgan Chase & Co.’s global head of asset liability management research and strategy, agrees with Williams that for now the system is “functioning.”

Fulfilling Role

“But for Treasuries to serve the purpose for which they have been anointed -- which is a cash substitute -- the intermediation mechanism” needs to be more robust, Younger said. “It’s still important to fix the system” so that it can handle a March 2020 type of strain, he said.

Among the other moves regulators are looking at is enhancing the role of central clearing of Treasuries, for which the Securities and Exchange Commission has put forth a proposal. For its part, Pacific Investment Management Co. wants investors to be able to trade directly with each other.

“The individual initiatives being discussed may not be silver bullets on their own, but collectively they would contribute to a more efficient, resilient and liquid market,” said Stephen Berger, global head of government and regulatory policy at Citadel Securities. “Delaying unnecessarily the implementation of the market enhancements being discussed perpetuates the risk that the Fed feels compelled to intervene during a future market dislocation.”"

MY COMMENT

The problem with the FED trying to fix anything is they have no clue. I love the quote above from a FED President......it does not give you much confidence when the best he can say about the Treasury markets and liquidity.....is......"it is still functioning".

 

At least the markets have moderated the losses a bit over the past half hour or so. Where we close.....nobody knows.

I will state.....ALL the above is short term stuff....so....I continue to be fully invested for the long term as usual.

 

It will be ALL about the....."E's"....going forward to the end of the year.

ELECTION.....EARNINGS.

 

I have to say....while I am....."bitching"....about the FED today.....I am making money. My account is nicely positive versus the SP500 so far. I have five stocks that are UP for the day....AMZN, COST, NVDA, HD, and GOOGL.

Costco is the one stock that is leading the way for me today. Good old COSTCO......an ICONIC company. Here is the reason for the big gain they are seeing today.

Costco Comparable Store Sales Rise 8.5% in September

https://sports.yahoo.com/costco-comparable-store-sales-rise-164146627.html

"Investing -- Costco reported Wednesday comparable store sales grew 8.5% in September as double-digit growth in its core U.S. market more than offset weakness abroad.


Costco Wholesale Corp (NASDAQ:COST) was flat in aftermarket hours.

Net sales rose to $21.46 billion in the four weeks ended Oct. 2, an increase of 10.1% from $19.5 billion last year.

Comparable sales in the U.S. and Canada led the gains, rising 11.2% and 5.7% respectively in September, while international fell 1.9%.

E-commerce sales were up 0.7%."

 

So right Smokie.....simply GROSS INCOMPETENCE. These people are in a little self contained bubble. They tour around in their circle of media and government people....that hang on their every word and fawn over them. It is simply DISGUSTING to watch......think of the money they are wasting doing this....all the travel expenses, staff, etc, etc, etc.

In the meantime.....is anything improving......inflation, supply chain, totally screwed up labor markets, the stock markets, etc, etc, etc......NOPE.

 

I lost my gain by the time the close came around today. I had only two stocks up at the close....HD and COST. BUT....at least my loss for the day was MINIMAL. My VICTORY today was limited to beating the SP500 by 0.52%.

With my "0" loss yesterday and the minimal loss today....I am sure that I am STILL way in the green for the week....thanks to the big gains on Monday and Tuesday. Tomorrow will be the deciding day for me.

It will take a GIANT loss tomorrow to prevent the SP500 from being positive this week........somewhere in the neighborhood of......above 4%. We look on track for a positive week.

There you go......I have now jinxed the markets for tomorrow.

 

A good commentary for those that REALLY are....long term.

Long-term investors should ‘absolutely buy now,’ says Jeremy Siegel — why the world-renowned Wharton professor sees ‘excellent value’ in today’s stock market

https://finance.yahoo.com/news/long-term-investors-absolutely-buy-191000969.html

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

"With the Dow, the S&P 500, and the Nasdaq all deep in the red year to date, it might be tempting to hit the sell button and get out of this ugly market completely.

But a prominent economist suggests otherwise.

“If you're a long term investor, I would absolutely buy now,” Jeremy Siegel, professor of finance at the Wharton School of Business, tells CNBC. “I think these are absolutely great long-term values.”

Here’s a look at why the professor is so optimistic.

Fed should be forward looking

One of the reasons behind this year’s stock market slump is inflation. Consumer prices were rising at their fastest pace in 40 years. While the headline CPI number has cooled off a bit recently — August’s inflation rate was 8.3% year-over-year — it’s still worryingly high.

To tame inflation, the Fed is raising interest rates aggressively. The central bank increased its benchmark interest rates by 75 basis points last month, marking the third such hike in a row.

If rampant inflation continues, more rate hikes could be on the way. And that does not bode well for stocks.

Siegel points to one segment of inflation that is cooling down: housing. But that isn’t properly reflected in the index numbers.

“We pointed out that the way these indices are constructed, that housing costs are very lagged, and they're going to continue to go up, even though as we saw the Case-Shiller Housing Index, and the National Housing Index, housing prices are going down,” he says.

Siegel suggests that instead of making decisions based on lagging indicators, the Fed “has to be forward looking.”

“They have to look at what's going on in the market, in the housing market, in the rental market, in the commodity market.”

‘Excellent value’

The pullback in stocks has been painful, but that’s exactly why this could be an opportunity.

The reason, Siegel explains, is that the fall in stocks has brought their valuations down.

“When you're talking about 16 times earnings, and even if they're clipped by a recession, and you shouldn't just base it on recession earnings, you should base it on longer term earnings, which I think are very favorable … I think these are just absolutely excellent values,” he says.

Of course, having attractive valuations does not mean stocks won’t drop further.

“Could it go down more? Of course, in the short run. In bear markets, it’s gone down more,” Siegel admits, adding that “anything can happen on the short term.”

No lost decade

The outlook can be bleak, even for those who already made billions from the markets.

Billionaire investor Stanley Druckenmiller recently said that stock market returns could be flat for the next decade.

Ray Dalio’s Bridgewater Associates warned earlier this year that we could be facing a “lost decade” for stock market investors.

Siegel remains optimistic.

“I disagree with that completely that the Dow or S&P 500 would be flat [over the next decade],” he says.

“We added 40% to the money supply since the pandemic began in March of 2020. Earnings have historically moved up just with inflation and the money supply. So stocks should be 40% higher than they were.”

The economist explains that at one point, stocks were 50% to 55% higher than pre-pandemic levels. But with the recent pullback, they are just 20% higher. And that means investors have something to look forward to for the next decade.

“To say that 10 years from now, we're going to have the same Dow when the earnings yields that I see there on the market, show that your returns are going to be probably in the neighborhood of 6% per year after inflation.”"

MY COMMENT

This little article mentions the......LOST DECADE. I remember that ten year period very well.....I knew many people talking about a lost decade. I also remember thinking.....WTF are they talking about.....I am making good money....I dont see any lost decade at all.

Of course I sat out the markets for a year during 2008 and 2009....and got back in about March of 2009.

I continue to feel like we have hit a soft bottom.....NOW. I also continue to feel that we have perhaps another 10% to the downside even though we may be at a soft bottom. I will take a 10% downside.....in a market that is down 20-35%.....every day all day long.