The Long Term Investor

As an......"investor".....it is best to live in the long term world.

Long-term forecasts reflect the recent past, which isn’t predictive.

https://www.fisherinvestments.com/e...t-decade-chatter-remember-the-new-roaring-20s

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

"Throughout this summer and fall, as stocks bounced around their year-to-date lows, a grim prediction has periodically flared: a lost decade for stocks. The US, some forecasters warn, is doomed to repeat Japan’s 1990s malaise. This isn’t a new warning—it flared in 2009 and 2010, illustrating how lost-decade sentiment tends to flourish during and just after bear markets. Actually, if you look back at the past several decades of financial writing and news coverage, you see decade-ahead forecasts tend mostly to reflect people’s feelings about the present or very recent past. To see this, look no further than what people were saying throughout mid-to-late 2020 and 2021.

We refer, of course, to calls for a new “Roaring 20s” as lockdowns ended and society unleashed several months of pent-up demand. It started with a simplistic historical parallel. As The Atlantic explained: “The Devastation of World War I and the 1918 flu pandemic was quickly followed by a manic flight into sociability. The Roaring Twenties saw a flowering of parties and concerts. The 1918 virus killed more people than the deadliest war humanity had hitherto experienced, but it did not reduce humanity’s determination to socialize.” It didn’t offer a stock market or economic forecast, but it pointed out the many ways human activity would surely keep humming as society learned to live with the virus. Other outlets were less circumspect, exploring the seemingly strong potential for the US economy to roar all decade long. Many cited the stock market’s swift bounce after early 2020’s lockdown-induced bear market and extrapolated it far forward. Party time!

Now, don’t get us wrong—that view wasn’t necessarily the central, mainstream one. But it was common enough—and a sign at the time of burgeoning optimism. Now, though, people seem largely to have memory holed it. No one talks about the new Roaring 20s anymore. Economies did reopen, and output did boom. There was huge catch-up growth. Global stocks more than doubled between the lockdown bear market’s end and December 2021. But just when it perhaps seemed like everything was on track, the ground shifted. Supply chain concerns, fears of inflation and Fed rate hikes perked. Rising oil prices in the run-up to and immediate aftermath of Russia’s Ukraine invasion fueled more dread, as did chatter over the war possibly spreading. Talk of recession mounted. As worries snowballed, the stock market downturn that began in early January became a full-fledged bear market. Rallies would spur some hope, but gloom soon returned as they proved to be false dawns. The good cheer that ruled in 2021 was gone, and deep pessimism settled in its place—giving rise to all this year’s lost-decade chatter.

We think this saga shows the futility of thinking in decade terms. Stocks don’t move in decade-long windows. Rather, bull and bear markets’ lengths run the gamut. The 1990s and 2010s may have been decade-long bull markets, but those are outliers in history. The 1980s were the third-best decade on record for the S&P 500, with a total return of 400.3%.[ii] It happened to include two bear markets, including the grueling slog that ran from late November 1980 through mid-August 1982. The 1950s—the S&P 500’s best decade—had a year-plus-long bear market smack in the middle. Meanwhile, the only decade since the 1930s with a negative total return, the 2000s, actually had a positive run from October 2002 – October 2007. It just happened to be a relatively small bull market bookended by two of the longest bear markets on record—the Tech bubble’s implosion at the beginning and the Global Financial Crisis at the end. The other modern decade everyone remembers as awful, the 1970s, actually had a 75.3% return as the bull market years outweighed the bear market that lingered in 1970’s first half and the downturn of January 1973 – October 1974.[iii]

Maybe seven years from now, as the 2020s are winding down, we will be looking back at a decade with big returns that seemingly justifies all that Roaring 20s hype after all. But it won’t have been a straight line there—2022 assures that. Similarly, if the decade’s tally happens to be flattish in the end, that flattishness will probably be the net result of many ups and downs along the way. To think in decade terms is to erase this cyclicality and forget that whatever stocks do cumulatively over some long period of arbitrary length, there will almost surely be opportunities within that window. Secondarily, it is to forget that even in very good long-term stretches, there are probably periods of scary market declines that will tempt you to error. Thinking in long-term cycles only makes investing look a heck of a lot easier than it is and pays short shrift to the myriad temptations that volatility brings.

We always encourage people to think long term and remember that, over time, stocks have delivered high long-term returns, helpful for many who seek equity-like growth to finance their goals and objectives. But we also urge everyone to have realistic expectations along the way. There will be good years and bad. Sometimes those will even out to wonderful decades, sometimes middling decades and sometimes sad ones. Crucially, it is probably safe to say no one will identify these in advance. At the beginning of the aforementioned 2000s, everyone was predicting the “new economy” where perma-boom replaced boom-and-bust. Ten years later, lost-decade fears preceded the longest-ever bull market in the 2010s. All we have done in the past year and a half, with the shift from Roaring 20s to lost decade talk, is compress this sentiment cycle, which really just reflects how short the March 2020 – January 2022 bull market was.

So any time you hear a projection about the next decade, be it good or bad, see it for what it is: a snapshot of investor sentiment, which stems from whatever the market and economy have just done. That is inherently backward-looking. Past performance simply doesn’t predict future returns."

MY COMMENT

How true. A commentary on human nature and as a result....investing. Everything is obvious....until it is not. In the end the ONLY way to invest in a secure and rational way for life is long term investing. By investing in this fashion....the short and medium term are irrelevant. There is no need to make predictions or anticipate anything.

 

Work is like everything else in life. Humans are intended and have been for all of history....social animals. We are NOT made to sit in some bedroom corner by ourselves and interact on a screen. Through all of human history people have gathered in groups and tribes and that is the source of ALL human learning and experience.

Another point.....show me anyone......male or female...... that is working from home with kids in the house.....and....I will show you someone that is NOT working up to the potential that they would in the office. Too often work from home seems to be a way to avoid paying for daycare. (yes I recognize that this is a very dangerous comment)

SOMEHOW....three years ago and going back for many decades......people managed to go to work and function. BUT.....as I have said many times....this will not last for long....at least in the USA. Once business knows they dont need people in the office......YOUR JOB.....will be migrated to a third world country where YOUR FORMER company can hire 2-4 people for what they are paying you......and....will not be on the hook for medical insurance, benefits, 401K, office expenses, Social Security taxes, etc, etc, etc.

 

AND.....to stay with the current topic of discussion.

Zucked and Musked
The first-order effect of remote work is emptier offices. The second-order effect is leaner companies. The third-order effect is more inequality and opportunity.

https://www.drorpoleg.com/zucked-and-musked/

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

"People thought Mark Zuckerberg was bad at running a social media company. And then Elon Musk took over Twitter. Two of the world's most hated (and admired) CEOs take a different approach to office work. But both approaches are bad news for traditional offices.

2.5 years ago, Zuck speculated, "Over the next 5-10 years, I think we could have 50% of our people working remotely." Back then, this was a bombshell announcement. Most other employers and landlords expected office work to return to "normal" within weeks.

Around the same time, during the May 2020 lockdowns, a Gallup survey found that 49% of the people currently working from home want to work at the office "as much as they did pre Covid."

This was considered good news. Employers and landlords found solace in the fact that so many people were eager to return. But as I pointed out back then, "A glass can be half full and remain valuable. An office building can't."

But people working from home was only the beginning. In June 2020, I noted that there's a more significant shift that most analysts are missing:

Remote work doesn't just move some jobs out of the office — it also makes it clear that many office jobs are not necessary. This trend was hard to notice amidst the general Covid turmoil. But it is becoming easier to see now.

Immediately after taking over Twitter, Elon Musk started firing people. Before long, more than 70% of the company was gone. At some point, there were fears that the site won't survive the weekend.

But it did survive. And it has remained up for a few weeks since. Perhaps at some point, the whole thing will fall apart. For now, it looks like it can keep going with far fewer employees. As some pointed out, the actual impact might be felt in the long term when Twitter fails to ship new features or improve. But Twitter already failed to ship new features and improve when it had all those employees that are now gone.

The above is not meant to ignore the hard work of Twitter employees over the past decade. It is simply stating a fact: Among its peers, Twitter had the lowest revenue per employee, and even during the craziest bull market the world has ever seen, the company's market capitalization barely touched its 2013 highs. The high price Musk paid for Twitter represents a 16% decrease in value since the beginning of 2014. For comparison, Facebook, another troubled social media company, is up 116% during the same period — and that's after dropping more than 70% from 2021 highs.

And yet, in the face of massive layoffs, some employers and landlords still saw a silver lining. Musk insisted that everyone work from the office. He even converted some meeting rooms into sleeping rooms to make it easier for him and others to stay at work indefinitely.

But tech investors saw the news for what it is. As Scott Galloway pointed out, investors are starting to push large and small companies to attempt similar layoffs. The sentiment is captured in a letter sent by TCI Fund Management, an investor with more than $6 billion worth of Alphabet (Google) shares:

"We are writing to express our view that the cost base 0 of Alphabet is too high and that management needs to take aggressive action. The company has too many employees and the cost per employee is too high... our conversations with former executives of Alphabet suggest that the business could be operated more effectively with significantly fewer employees."

The letter quotes Brad Gerstner, CEO of investment firm Altimeter Capital:

"It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people."

This type of pressure is driving layoffs across the tech industry. Some readers have noted that it's not surprising that tech companies are bloated after a decade of fast growth and cheap money. It's only natural for them to "shed some fat." But most of these companies are still growing and will continue to grow over the next decade. And the whole point is that their workforce was (relatively) unproductive, even during the best of times.

There's also a second reason to maintain such a large workforce. As I wrote earlier this year, over-hiring is a way to deal with the non-linear nature of creative work:

"One of the biggest challenges of modern business is the role of chance events in determining a product's success. Companies can no longer simply "hire good people" and "develop products that sell."

We are no longer in a linear, industrial economy in which the right inputs are very likely to produce the right outputs. Instead, we are in an economy in which the right inputs are just table stakes; they are a lottery ticket. But the right outputs — the things that become successful — are those that happen to draw the attention of the crowd at the right moment and, in turn, are boosted by algorithms that turn initial success into ultimate, absolute success."

Over-hiring is not the only way to deal with this uncertainty. There are also other approaches:

In some industries, companies deal with this uncertainty by avoiding any attempt at innovation. This is the reason why the most successful movies of the 21st Century are remakes or extensions of earlier, already-successful movies. Trying something new is too risky. As long as it is viable, recycling remains the most logical strategy. But it is not always viable. And in other industries, companies must make multiple bets in order to have a fighting chance.
Tech giants treat employees as bets. As long as one of them might come up with the next Instagram or Gmail, it is worthwhile to employ a bunch of them and see how it goes. Worthwhile, that is, as long as you can afford it:

"These companies are not recycling ideas, but they are recycling capital. They are using billions made from past successes to bet on employees who will maybe develop a future success that will help finance even more bets. This dynamic is painfully visible in companies like Google, Facebook, and Apple, who are hoarding a huge chunk of the world's talent — throwing people and ideas at the wall to see what sticks."

At some point, you run out of money to finance this strategy (Twitter). Or your investors run out of patience (Google). Or your founder decides to spend more money on other bets (Facebook). Or a Chinese competitor (TikTok) and app-store privacy restrictions (Apple) are eating your margins and forcing you to cut costs (Facebook). For whatever reason, hoarding talent becomes unsustainable.

Twitter is proof that a company can go remote even if it forces everyone back to the office. The biggest change is not in where people work but in how people work.

Where does that leave offices?

Wherever they were, to begin with. They can't move. But they can get emptier. The first-order effect of remote work is emptier offices. The second-order effect is leaner companies and even emptier offices. The third-order effect is an explosion of inequality and opportunity. But that's a story for another time."

MY COMMENT

NOPE......dont have one. I have said about all I have on this topic....but I felt this little article was relevant to the discussion.....so I posted it.

 

NIKE had a HUGE earnings beat yesterday.....they made it look so easy. they even did it with China being a drag on their earnings.

Nike stock surges as its biggest problem may be vanishing

https://finance.yahoo.com/news/nike-stock-surges-earnings-inventory-problem-105928402.html

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


"Nike (NKE) is getting its inventory bloat under control, much to the delight of investors.

Shares of the apparel and footwear giant surged 12% in pre-market trading on Wednesday as better-than-expected sales and earnings quieted — for now — concerns that Nike would be hammered by sluggish global economic growth. The stock is the top trending ticker on Yahoo Finance as of 5:30 a.m. ET.

But the real standout from Nike's fiscal second quarter was the company noticeably working down its excess inventory — caused earlier this year by the economic pullback — compared to three months ago. It's an issue that has plagued profit margins (due to Nike aggressively liquidating merchandise) and the stock price, analysts have contended.

Nike's inventory fell 3% sequentially, spurred by a high-single-digit percentage drop in units. Total inventory units are down by a double-digit percentage compared to the first fiscal quarter.

Management told analysts on an earnings call it continues to focus on clearing inventory, particularly through off-price retail stores. Further progress is expected into calendar year 2023, including a more cautious approach to buying new inventory.

"We believe the inventory peak is behind us actions as we're taking in the marketplace are working," Nike CEO John Donahoe said.

The inventory improvement sets the stage for better profit margins for Nike in coming quarters, provided the global economy doesn't fall off a cliff.

Yahoo Finance Analysis: Nike's Earnings

The Good

• Sales, gross profit margins, and earnings beat analyst estimates.
  
  
• Inventory levels fell in units sequentially.
  
  
• Management called out strong online sales in November.
  
  
• Sales strength has continued into December, execs said on the conference call.
  
  
• Fiscal-year sales now seen up by a low-teens percentage, up from a low-double-digit percentage previously.
  

The Not So Good

• Inventory still increased 43% year over year.
  
  
• Gross profit margin fell 300 basis points year over year due to increased markdowns.
  
  
• Fiscal year gross profit margins still seen falling 200 to 250 basis points year over year.
  
  
• Sales in Greater China declined 10% year over year.
  

What Wall Street Is Saying

"We believe Nike's 2Q performance proves the brand remains strong, margin drivers are intact (Direct to Consumer / Digital) and global demand is healthy. Looking ahead, we expect inventory and China-related issues to subside, driving margin improvements. We move our estimates higher and recommend purchasing Nike shares and selling Lululemon shares." -Jefferies Randal Konik (Buy rating; $140 price target)

"Going forward, we expect GM guidance to again prove conservative and flag that unlike the majority of retail seeing the pandemic revenue pull-forward weigh on top-line, NKE's seeing material N.A. strength, with wholesale an interestingly positive call-out this quarter. With top-line momentum and China improving into materially easing compares." -BMO Capital Markets Simeon Siegel (Outperform rating; $120 price target)"

MY COMMENT

Good old NIKE. I have held that stock for a long time. They are a HARBINGER of the future of the economy and business for many BIG CAP ICONIC companies. As we move away from the COVID DRAG on business and supply chains....company results for the strongest businesses will greatly improve.

 

Thank you FED.

Home sales tumbled more than 7% in November, the 10th straight month of declines

https://www.cnbc.com/2022/12/21/home-sales-tumbled-november.html

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

"Key Points

• Home sales declined 7.7% on a monthly basis in November.
• Sales were down 35.4% year over year, marking the tenth straight month of declines.
• The median sales price rose 3.5% to $370,700 from a year ago.

Sales of existing home fell 7.7% in November compared with October, according to the National Association of Realtors.

The seasonally adjusted annualized pace was 4.09 million units. That is weaker than the 4.17 million units housing analysts had predicted, and it was a much deeper fall than usual monthly declines.

Sales were down 35.4% year over year, marking the tenth straight month of declines. That was the weakest pace since November 2010, with the exception of May 2020, when sales fell sharply, albeit briefly, during the early days of the Covid pandemic. In November 2010, the nation was mired in the great recession as well as a foreclosure crisis.

These counts are based on closings, so the contracts were likely signed in September and October, when mortgage rates last peaked before coming down slightly last month. Rates are now about one percentage point lower than they were at the end of October, but still a little more than twice what they were at the start of this year.

“In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the Covid-19 economic lockdowns in 2020,” said Lawrence Yun, NAR’s chief economist. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”

At the end of November there were 1.14 million homes for sale, which is an increase of 2.7% from November of last year, but at the current sales pace it represents a still-low 3.3 month supply.

Low supply kept prices higher than a year ago, up 3.5% to a median sale price of $370,700, but those annual gains are shrinking fast, well off the double digit gains seen earlier this year. It is still the highest November price the Realtors have ever recorded, and, at 129 straight months, it is the longest running streak of year-over-year price gains since the realtors began tracking this in 1968. Roughly 23% of homes sold above list price, due to tight supply.

“We have seen home prices come down from their summer peaks over the past five months. At the same time, we have also seen rent growth retreat for 10 consecutive months,” wrote George Ratiu, senior economist at Realtor.com in a release. “However, the cost of real estate remains challenging for many households looking for a place to call home, especially as high inflation and still-elevated interest rates have been eroding purchasing power.”

Sales decreased in all regions but fell hardest in the West, where prices are the highest, down nearly 46% from a year ago.

Homes sat on the market longer in November, an average 24 days, up from 21 days in October and 18 days in November 2021. Despite the slower market, 61% of homes went under contract in less than a month.

With prices still high and mortgage rates hitting a cyclical peak, first-time buyers remained on the sidelines. They were responsible for 28% of sales in November, which was unchanged from October, and up slightly from 26% in November 2021. Historically first-time buyers make up about 40% of the market. A separate survey from the Realtors put the annual share at 26%, the lowest since they began tracking.

Sales fell across all price categories, but took the steepest dive in the luxury million-dollar-plus category, dropping 41% year-over-year. That sector had seen the biggest gain in the first years of the pandemic.

Mortgage rates have come off their recent highs, but it remains to be seen if it will be enough to offset higher prices.

“The market may be thawing since mortgage rates have fallen for five straight weeks,” Yun added. “The average monthly mortgage payment is now almost $200 less than it was several weeks ago when interest rates reached their peak for this year.”"

MY COMMENT

LOL....great minds think alike. As I as typing this I heard the business TV teasing this story after the commercial break.

 

Now I see what has been wrong with the markets lately....EMMETT comes back......and the markets take off.

 

Might be a good year to take a big withdrawal from a retirement account Emmett.

She will have no penalty and with the market being down the taxes will be much lower. Right now is actually a pretty good time for someone to cash in a retirement account while down and put the money into a taxable brokerage account for the long term. You could cap off the......future..... taxable income and get those taxes over with in a DOWN YEAR.

 

A very nice day today. I got some of my cushion back today with 9 stocks UP and 1 stock down. Of course the down one was TSLA.

I also got in a really nice beat on the SP500 by 1.20%.

 

Here is the supposed reason for the good day.

Stocks close sharply higher as Nike, consumer sentiment spur Wall Street rebound

https://finance.yahoo.com/news/stock-market-news-live-updates-december-21-2022-123750903.html

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

U.S. stocks rallied Wednesday as strong earnings from Nike and FedEx, along with upbeat consumer confidence data, lifted sentiment after a recent bout of selling.

The S&P 500 (^GSPC) surged 1.5%, while the Dow Jones Industrial Average (^DJI) jumped more than 500 points, or 1.6%. The technology-heavy Nasdaq Composite (^IXIC) also advanced 1.5%.

An upbeat gauge of consumer confidence helped raise the mood on Wednesday. The Conference Board’s Consumer Confidence Index rose to 108.3 this month — the highest since April — from an upwardly revised 101.4 reading in November, data released Wednesday showed. Economists expected a figure of 101, per Bloomberg consensus estimates.

Nike (NKE) shares soared 12.2% after the retailer handily beat second-quarter profit and revenue expectations and reported a decline in inventories from the previous period. While the pileup was still up year-over-year, Nike CEO John Donahoe said he believed the company was past its inventory peak.

Shares of FedEx Corporation (FDX) jumped 3.4% after the company revealed its aggressive cost saving efforts. CEO Raj Subramaniam said FedEx identified an additional $1 billion in savings beyond the forecast it gave in September as part of its "ongoing transformation while navigating a weaker demand environment.” FedEx sparked a deep sell-off in September when it issued a warning about its outlook for the U.S. economy.

Meanwhile, Rite Aid's (RAD) stock tanked about 17.5% after the drugstore chain reported losses in the fiscal third quarter, weighed down by a drop-off in COVID vaccinations and testing.

Tesla (TSLA) remained in the limelight after sliding 8% to a fresh two-year low on Tuesday – a decline that came after dropping 16% last week. Chief Executive Elon Musk confirmed on Twitter late Tuesday that he would step down as head of Twitter once he finds a replacement. Shares of Tesla closed around flat Wednesday afternoon.

Separately, the electric vehicle maker is expected to freeze hiring and deliver another round of layoffs next quarter, per a report from Electrek, which cited a source familiar with the matter.

I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.

— Elon Musk (@elonmusk) December 21, 2022

Oil prices rose for a third straight day as traders weighed a report that showed a larger-than-expected drop in U.S. stockpiles against worries over demand and an expected snowstorm domestically. West Texas Intermediate (WTI) crude futures were up nearly 3% to top $78 per barrel.

Wednesday’s moves come after a volatile session Tuesday that followed a hawkish move by the Bank of Japan – seen as the last of central banks with easy money policies – to raise the cap on its 10-year government bond yield after the U.S. Federal Reserve, European Central Bank, and others raised interest rates last week.

Investors have been hoping for a Santa Claus rally — a steady rise in the stock market that typically occurs at the end of December, typically defined as covering the last five trading days of the year and first two of the new year. But concerns over “higher for longer” rates and a looming recession have dampened seasonal optimism."

MY COMMENT

For a day the markets somehow overcame the IDIOCY of the short term. Earnings have now come and gone for the most part.....and.....were actually good. The economy is STILL recovering from the shut-down and moving forward.