The Long Term Investor

No matter how much they take in and how much they spend......they always want more.

Checking in on the Global Minimum Tax

https://www.fisherinvestments.com/e...mentary/checking-in-on-the-global-minimum-tax

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

"Newsflash: It is still advancing—at a snail’s pace.

Editors’ note: Given tax policies touch politics, please keep in mind MarketMinder is politically agnostic and never for or against any particular policy. We assess developments solely for their potential market impact—or lack thereof.

Last Thursday, preparing for a planned 2024 rollout, the Organization for Economic Cooperation and Development (OECD) issued final guidance on how governments should enact a 15% minimum tax on large companies that 137 countries agreed to in October 2021. This may sound like the much-vaunted Global Minimum Corporate Tax is gathering pace and implementation is at hand. But that impression doesn’t match reality, in our view. And a look at the long and uneven process shows why tax overhauls—even those billed as major once-in-a-generation shifts like this—generally have way less market impact than most think.

When last we left it almost a year ago, the EU had run into a roadblock, as several low-tax member nations objected to the plan—wanting to see US action before signing on. After a mid-December breakthrough, though, Poland and Hungary dropped their objections and all 27 EU members ostensibly greenlit the proposal. Now, the OECD is taking the next steps by issuing detailed instructions for incorporating it into governments’ tax codes.

But here is the thing: The OECD’s instructions largely amount to wishful thinking at this point. Implementation isn’t at hand, instructions or no. Countries must still vote to enshrine the new code into national law. None—zero—have yet. Even in the EU, its members need to transpose it onto each of their books, meaning they have to pass national parliaments. That is a potentially big hurdle considering the gridlock dominating many parts of the EU (to say nothing of non-EU nations like the UK). The EU wants this done by yearend—stragglers otherwise face the European Court of Justice (ECJ). But national parliaments have withstood ECJ ire before—sometimes for years—before resolution.

Consider Hungary, which was the main objector before December. Hungary has long been at odds with the EU and its executive arm, the European Commission, as the EU alleges widespread cases of judicial corruption violate its rule-of-law standards. On these grounds, the bloc froze COVID and other funding starting in 2020. Now the EU has agreed to partially release the funds if Hungary backs the tax reform and meets other conditions. We have no idea how Hungary’s Parliament will vote, but given it was willing to spend several years out of compliance, we don’t think it is out of the question to believe it may stall global minimum corporate tax legislation unless it can extract further EU concessions.

Besides Hungary, Switzerland—outside the EU—has expressed reservations about implementing the tax. It faces a June referendum to raise its corporate tax to 15%—for companies with revenues exceeding €750 million (~$800 million)—to meet the global deal’s requirements. Presumably, an agreed fail safe rule pressures countries to conform to this. Since it allows other governments to collect the difference in their jurisdiction, it could shift revenue non-compliant nations would otherwise get away from them.

That may seem enticing. But a caveat to the rule also allows countries with below-15% tax rates to collect any such top-up taxes first. And it may make sense for them to do so. Switzerland could keep its tax rate globally competitive for companies with €750 million or less in sales and get the tax haul from corporations over that threshold. Questions also abound about conditions that would tax the largest multinationals (€20+ billion in sales and 10%+ “profitability”) where they make money versus where they locate their regional headquarters for tax purposes. The problem here: This runs against long-standing tax treaties, which countries have yet to rewrite.

And then there is America. While the Biden administration—led by Treasury Secretary Janet Yellen—spearheaded the global minimum tax effort last year, even with Democrats’ nominal congressional control, the initiative fell short. Senator Joe Manchin, holding the pivotal vote, didn’t agree. He was reportedly reluctant for America to go first and potentially place its companies at a competitive disadvantage. Now, with Republicans in the House, few see the US adopting the measure any time soon, which may rekindle objections in other nations worried America wasn’t going to advance it originally.

Like Switzerland (or Hungary), if America doesn’t budge and other countries then take the lead, its qualifying companies could be subject to higher taxes in complying jurisdictions abroad. This wouldn’t take effect immediately, though. The latest OECD guidelines offer a partial reprieve on it through 2025. And here again: No nation has enacted this plan. It isn’t law anywhere, as the OECD doesn’t make laws.

Anyway, the thinking goes Congress will be more likely to take up major tax legislation when individual tax breaks in 2017’s Tax Cut and Jobs Act (TCJA) expire. Maybe. But that is a bet on both the structure of the US government and the way political winds blow at the time. In the meantime, the US already has minimum corporate taxes: Last year’s Inflation Reduction Act reinstated a 15% corporate alternative minimum tax, and the TCJA included a 10.5% global intangible low-taxed income (GILTI) tax and a 10% base erosion and anti-abuse tax (which moves to 12.5% in 2026).

Although complicated, with all the moving parts—and carve outs—we expect any new tax (if implemented) will have far less impact than feared. The complication may present headaches to corporate tax departments, but we doubt it would be anything they couldn’t handle. Corporations are well versed in dealing with complicated tax regulations that span the world. Also, a 15% minimum tax isn’t exactly onerous considering the vanishingly small number of countries with effective tax rates below that. Now, some significant ones do, and taxes moving to where companies earn profits from those lower-tax domiciles could have an impact. But don’t overrate it.

For example, while Ireland is well known for having a low tax rate (15% next year, up from 2021’s 12.4% effective rate), the European Commission cracked down on profit shifting in 2015. Multinationals’ tax-mitigation strategies that book all their European profits in Ireland aren’t as advantageous anymore. Meanwhile, the TCJA changed US corporate taxes to a territorial system—US companies are already paying countries’ taxes on income earned there.

In any event, tax changes haven’t historically carried big market impact. Take US corporate taxes. Exhibit 1 shows whether cut or hiked, there is no set return pattern to them. Other factors matter more—like economic conditions. Yes, tax hikes during the Great Depression weren’t helpful, but it was the Great Depression that inordinately weighed—which most of post-war history bears out. The other reason why taxes don’t seem to sway stocks: They are closely watched, sapping their power over markets. That is pretty clearly the case here, given the vast attention paid to the OECD plan for the last several years.

Exhibit 1: Stocks Aren’t Too Affected by Corporate Tax-Rate Changes Regardless




Source: Global Financial Data, Inc., Internal Revenue Service, as of 2/6/2023. S&P 500 price returns, 12/31/1925 – 12/31/2018. Data are weekly from 12/31/1925 – 12/31/1927 and daily thereafter.

The global tax regime is something we will continue to monitor, particularly for any changes that may yield unintended consequences. But with the long row left to hoe—and lawyering over every inch of it—we don’t see much likely to catch stocks off guard."

MY COMMENT

Yes....they never give up on their quest to take money anywhere they can find it.

It is interesting to look at the top corporate tax rates in the above chart. In 1941 it was 31%.......over the next 27 years it grew to 52.8% in 1968. It than went down to 35% in 1993 and finally in 2018 went to 21%.

You know some day all the climate change requirements for company earnings....combined with all the ESG stuff and wokism that is rampant in companies....plus taxes....plus other government regulation and requirements.....will KILL OFF our capitalistic system. If people are still funding their own retirement through 401K and other types of plans.....it will be a very bad day for regular people. Basically the end of our markets. The more you impose requirements on companies and reporting that has nothing to do with business and the more you impose stakeholder capitalism (Socialism) on companies.....the closer we are to NOT having a free capitalistic system and stock markets. As usual I will say.....once Humpty Dumpty is broken it will be impossible to ever put it all back together. Our systems, culture, social system and mores, business system, stock markets, etc, etc, etc.....is extremely fragile.....and we know from history that nothing is set in stone.

 

Much of investing........is all about psychology and human perception. Never underestimate the ability of humans to not see what is right in front of them.

Two up, one down: par for the course for yearly returns

https://www.evidenceinvestor.com/two-up-one-down-par-for-the-course-for-yearly-returns/

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

"The financial pages have made for pretty depressing reading since the start of last year. Stock markets fell around 19% in 2022 and, despite the positive returns we’ve seen in the first few weeks of 2023, there’s still plenty of negative commentary around. And yet, despite the pandemic, the war in Ukraine and all the other problems the world has faced, markets have still risen by more than 25% since the beginning of 2020.

As DAVID BOOTH, chairman and founder of Dimensional Fund Advisors, explains, two good years and one bad one is actually par for the course for equity returns. Market history, he argues, has shown us time and again that investors who stick with it when bad news abounds are generally rewarded in the end.

Consider everything investors have been through in recent years: a global pandemic, rapid inflation, war in Europe, and volatile stock and bond markets. It’s reasonable to feel uneasy in the face of so much uncertainty.

Now imagine it’s the end of 2019 and you know what you know now. You’re asked to predict market returns over the next three years. Will stocks be up 25%? Flat? Down 25%?







As you can see in Exhibit 1, the market was up almost 25% from 2020 through 2022.1 That includes last year’s 19% decline. Too often, people look only at year-by-year returns and don’t look at the total history of returns, which can be very informative.







We now have 97 years of research-quality data on stock returns. Exhibit 2 shows the distribution of annual returns over that time period, ranging from a year when the market lost almost 50% to two years when it gained more than 50%. The bulk of the returns are between –10% and +40%. When you look at a histogram like this, you get a sense of the distribution of returns, rather than a forecast of what any year’s return will be. The best prediction of what will happen next year is a random draw from one of these 97 years.





Let’s look more closely at the past three years. In Exhibit 3, the returns from 2020 and 2021 were positive, with 2022 negative. These three years to me seem representative of the history of stock returns: two steps forward and one step back. Two positive years and one negative. That’s about the way the world works.

But how do we explain the stock returns of these last three years, given the stress that people have felt with the pandemic? I think of it in terms of ingenuity and flexibility bailing us out. What happens when companies or individuals get hit with bad news? We don’t just sit there and take it — we try to figure out how to get back on track. That’s what happened here. The pandemic hit and markets dropped 20%.2 Then human ingenuity kicked in by the end of the year. We had a vaccine and started distributing it at incredible speed. That innovation continued as businesses adjusted into the next year.







Let’s look at how the last three years compare with the previous 94. Exhibit 4 shows the returns on the S&P 500 index and US Treasury bills over the last 97 years. The first row is the 94-year time period of 1926–2019. The S&P 500 index compounded at 10.2% per year. Treasury bills, which we think of as being the riskless asset, compounded at 3.32%.3 We think of the difference between 10.2 and 3.32, which is 6.88 percentage points, as the reward for taking the stock market risk. So that’s the equity risk premium, almost 7% a year.

The next row shows the last three years. The S&P 500 compounded at 7.66%. Treasury bills were basically flat (0.64%).The difference between those two is also about 7% — 7.02 percentage points. So, for the last three years, the risk premium of 7% a year is almost precisely what it had been the previous 94, about 7% a year.

In other words, the last three years in terms of equity returns have been “normal”.

How can we explain normal returns when it seemed to some people that the world was falling apart? Think of public financial markets as a giant information-processing machine. When bad news comes in, prices drop. When good news comes in, prices rise. The stock market every day is trying to set prices to induce investors to come in to invest. If the stock market had a negative expected outcome, nobody would invest. The stock market is constantly adjusting prices so that investors have a positive expected outcome.

One of the most important principles of investing is being a long-term investor with an investment plan you can stick with. The stock market will go up and down. It always has; it always will. If during this three-year period you felt like you had to bail out of stocks for some reason, then you had probably invested too much in stocks to begin with. But if you had about the right amount, for you, invested in stocks, there was a good chance that you didn’t have to make any adjustments to your portfolio mix.

What will happen over the next three years? Who knows? The good news is, if you’ve planned for the range of outcomes, you won’t have to worry about relying on a prediction."

MY COMMENT

This is the article of the day.

From this we see that it is all about....perception. It is all about human behavior and thinking. The common view is to jump to the negative.......to only see the moment in time that we are suffering through.........to not see the big longer term picture. That long term picture is usually.....POSITIVE.

 

I like this one also.....in the context of investing.

Risk and Regret

https://collabfund.com/blog/risk-and-regret/

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


"David Cassidy’s last words were, “So much wasted time.”

What a terrible thing to realize when it’s too late. And I wonder if it’ll become more common as many of us spend our days aimlessly scrolling our phones.

Regrets are a dangerous liability because their final costs are often hidden for years or decades. And decisions that are easiest in the short run are often the most costly in the long run.

Daniel Kahneman once said an important part of becoming a good investor is having a well-calibrated sense of your future regret. You need to accurately understand how you’ll feel if things turn out differently than you hoped.

Maybe regret is the best definition of risk.

Risk isn’t how much money you might lose. It’s not even necessarily how you’ll feel when you lose it – over time, a lot of painful experiences turn into cherished lessons. Real risk is the regret (or lack thereof) that might come years or decades later.

Jeff Bezos once described his decision to start an online bookstore in the mid-1990s:

The framework I found which made the decision incredibly easy was what I called the regret minimization framework.

I wanted to project myself forward to age 80 and look back on my life and I want to have minimized the number of regrets I have.

And I knew that when I was 80 I was not going to regret having tried this. I was

not going to regret trying to participate in this thing called the internet that I thought was going to be a really big deal.

But I knew the one thing I might regret is not ever having tried.

And I knew that that would haunt me every day. So when I thought about it that way it was an incredibly easy decision.

This is great. Most people don’t have the personality that can quickly move on from a failed project you’ve devoted your life to, but maybe he does. The important thing is that he knew it. Or maybe he would have been devastated if Amazon failed, but by age 80 he would laugh about it with no regrets. That’s equally important to know about yourself.

The other side of this is that most ordinary people can afford to not be a great investor, but they can’t afford to be a terrible one. Warren Buffett once remarked on the failed hedge fund Long Term Capital Management and said, “If you risk what you need in order to gain what you don’t need, that is foolish. It’s just plain foolish.” I also like the saying, “‘YOLO’ is just as good a reason to not do something.”

We spend so much time trying to quantify risk when the answer is just figuring out what you will or won’t regret. The anonymous Twitter account FedSpeak wrote, “The purpose of life is to experience things for which you will later experience nostalgia.” The opposite of regret."

MY COMMENT

Some food for thought. That is about all I have to say about this little lesson that applies to everything in life.....including investing.

 

A mild loss for me today in spite of the fact that I got beat by the SP500 by 0.87%. I was helped by having four of ten stocks positive today.....AAPL, NKE, HD, and HON.

I am happy to be at +10.35% year to date for my entire portfolio model. A years worth of returns in 6 weeks. Nothing for me to complain about there.

 

A losing week all the way around for the averages.....but so far so good for the year to date.

DOW year to date +2.18%
DOW for the week (-0.17%)

SP500 year to date +6.54%
SP500 for the week (-1.11%)

NASDAQ 100 year to date +12.56%
NASDAQ 100 for the week (-2.11%)

NASDAQ year to date +11.96%
NASDAQ for the week (-2.41%)

RUSSELL year to date +8.95%
RUSSELL for the week (-3.36%)

Looking forward to the weekend and next week. The focus is ALL long term.....as it should be for any "investor". Now if you are a "trader"....that is something else.

 

Back to the studio for me tomorrow. I am tired of this little break where we have not had any shows.

The good thing is that we have added 11.....new.....shows to our schedule over the past few days. On top of the nice schedule we already had lined up. Once we start up again on February 17....we have a good run for the next three months ahead of us.

Things are continuing to pick back up from the pandemic....in the live music business.

 

A productive day in the studio today.

We are working on 12 originals and finished all the tracks for one song today....so it is ready to mix. With all the shows we now have in a row it is going to be at least three weeks till we have a chance to hit the studio again to keep working. We have a bunch of shows over the next 10-12 weeks into the Spring......so we will have trouble finding time to do more studio work.......but with what we already have it is progressing and sounding good.

 

I love to see articles like this one.

Clock Is Ticking Louder on a Stock Rally the Pros Never Believed In

https://finance.yahoo.com/news/clock-ticking-louder-stock-rally-212410089.html

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

("Bloomberg) -- The buying binge that has propelled US equities almost without interruption for four months is nearing a point where past rebounds caved in.

It’s in the charts, with the S&P 500’s recovery reaching the same half-way-point threshold that spelled doom for bulls in August. The week also featured the year’s first big blow to a dip-buying strategy that by one measure has been as strong as any year since 1928. And warnings are blaring from bonds, whose bullish thrust had given cover to equity faithful convinced they’d weathered the worst the Federal Reserve had to give.

Signs of disenchantment were also visible a week earlier among hedge funds, whose trimming of positions was the biggest in two years, according to Goldman Sachs Group Inc. data. The S&P 500 dropped 1.1% in the past five days for the worst week since mid-December.

While one bad stretch doesn’t prove anything, it highlights the riskiness of a runup that has inflated equity prices by $5 trillion at a time when central bankers say their inflation-fighting campaign may have years to go and data on earnings and the economy continue to crater. Buying stocks now means taking a flier on valuations that are high by most historical standards and betting against a pundit class that is united as it ever has been in the view that stocks are due for a reckoning.

“The first half of the year is likely to show the impact of rate hikes that began all the way back in early 2022, that are finally feeding through the economy,” said Tom Hainlin, national investment strategist at US Bank Wealth Management. “We would not have a lot of confidence that this rally that we’ve seen in early 2023 is sustainable until we see the impact of rate hikes on the real economy.”

Underpinning losses in the week were worries that the Fed may raise interest rates above 5%, potentially to 6%, to slow demand. The two-year Treasury yield jumped more than 20 basis points to above 4.50%, the biggest weekly increase since November.

The spirited equity buying came to a halt ahead of January’s consumer price index, due Tuesday, which will shed light on the Fed’s progress in its battle to curb inflation. US equity funds saw outflows of $7.7 billion in the week through Feb. 8, according to a note from Bank of America Corp. that cited EPFR Global data.

Stocks were off to a solid start this year, bolstered by signs of softening inflation and better-than-feared fourth-quarter earnings. That flew in the face of all bear warnings that a tough first half was in store. Meme stocks got a boost as day traders returned, while risky shares, such as unprofitable technology firms, jumped, likely fueled by a forced covering by short sellers. Despite lackluster profits at large-cap companies, a flurry of job cuts sparked rallies in shares like Walt Disney Co. and Meta Platforms Inc.

At the beginning of this month, almost 80% of S&P 500 stocks were trading above their 200-day moving averages. Such market breadth, among other things, sparked calls that a new bull market had begun.

Partly propelled by a retail crowd whose post-pandemic dip-buying strategy proved successful, the new-year bounce has mostly been punctuated by a big impetus to go bargain hunting. In fact, the S&P 500 has risen an average of 0.45% on the day after a fall, a stronger rebound than any year since 1928.

“The dip-buying mentality is driven by the idea that as economic growth slows, the Fed will be forced to reverse its policy approach,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “The buy-the-dip story is one that I actually don’t expect to prevail or to be successful when interest rates are still in restrictive territory.”

When forces such as short covering or retail exuberance are at play, placing trust in charts can be dangerous. Consider the renowned 50% retracement indicator that is often touted as a nearly foolproof signal that a rally has legs. At a closing high of 4,180 on Feb. 2, the S&P 500 erased half of its peak-to-trough decline incurred during the last year. Then it fell in four of the following six sessions.

If the pullback continues, it’d mark the second time in a year when the indicator failed to live up to its billing. A similar signal was flashed in mid-August, spurring hope the worst was over. Then the selloff renewed and stocks spiraled to fresh lows two months later.

In many ways, the rally that lifted the S&P 500 as much as 17% from its October trough has been at odds with a worsening fundamental story. Outside the labor market, the economy has weakened, as evidenced by data on retail sales and manufacturing. The recession warning in the bond market is growing louder, with the yield gap between two-year and 10-year Treasuries reaching the deepest inversion in four decades.

Moreover, analysts’ estimates on how much corporate America will earn in 2023 have kept falling. Since the end of October, expected profits have dropped 5% to $220.70 a share, data compiled by Bloomberg Intelligence show.

Souring earnings sentiment can be trouble in a market when stocks are already expensive. At 18.3 times profits, the S&P 500’s multiple is above its 10-year average. When stacked against cash, now earning the most in years after the Fed’s rate hikes, the index’s earnings yield has fallen to the lowest level in 15 years.

While the latest bounce was a headache for money managers who were largely defensively positioned, there are signs that few are willing to embrace the rally. In fact, hedge funds tracked by Goldman’s prime brokerage last week trimmed their long holdings as stocks went up.

“I don’t think valuations support a further run here,” said Jake Schurmeier, portfolio manager at Harbor Capital Advisors. “And I would take the retail enthusiasm as a sign of some exuberance coming back into the market, which the Fed I think is also going to look at as a bit worrying if the economic fundamentals don’t continue to support that.”"

MY COMMENT

I very much WELCOME all the articles like this that are flooding the financial media this week. It is a sign of the total herd behavior of the media and also a BIG sign of the pressure that the....."professionals"......are putting on the media to push this story line.

My view as an "actual" long term investor......not a "trader" like all the so called "professionals":

First....I would much rather be doing what the "retail" investors are doing than following the course of the "professionals". The professionals are usually wrong as they push and focus on their short term agenda. They have certainly been very wrong about earnings for the past two plus years. They have also been TOTALLY wrong about the stock market rally that has been happening......in stealth mode....since last June over the past SEVERN MONTHS. SO......screw them.

As to the......"signs of disappointment in Hedge funds as they trim holdings"......BS and why would I care one bit what a bunch of trading Hedge Funds are doing as a long term investor. I consider that another positive indicator for retail investors that hold long term.

The statement above that......"Underpinning losses in the week were worries that the Fed may raise interest rates above 5%, potentially to 6%, to slow demand."......again total BS. The FED has been telling us for nearly a year.....yes an entire year......that their rate target is in the mid 5% range. So why would there be "worry" about the FED going above 5%........this is locked in and totally expected. Well.....except to the morons......I mean the "professionals.

The statement that "earnings and the economy continue to crater".....simply more delusional BS. Is the economy cratering right now and over the past six months.......resoundingly NO. It has been unexpectedly strong. Did earnings crater this time or over the past couple of years as predicted by all the "experts"......absolutely not.

As to the comment that the rally......."flew in the face of all bear warnings that a tough first half was in store".......well DUH.....the idiots were wrong again.....as usual. They can warn all they want....and huff and puff......but just because that is what they want does not mean it is going to happen in reality.

As to the rally and......."the new-year bounce has mostly been punctuated by a big impetus to go bargain hunting. In fact, the S&P 500 has risen an average of 0.45% on the day after a fall, a stronger rebound than any year since 1928"......again DUH. Long term investors are filling up on stocks at bargain prices. they are not short term....."traders"......like all the so called "professionals pushing all this BS. Over the long term the prices that are available are still a bargain considering the upside that we will probably see over the next FIVE YEARS.

The following statements by the professionals above are also simply IDIOTIC in my view as a long term investor:

“The dip-buying mentality is driven by the idea that as economic growth slows, the Fed will be forced to reverse its policy approach".

BS.......retail investors in particular and long term investors......do not care in the slightest about the media pushed myth of a "reversal" by the FED.

"In many ways, the rally that lifted the S&P 500 as much as 17% from its October trough has been at odds with a worsening fundamental story"

BS......again......there has not been a worsening of fundamentals. In fact if anything they continue to be WAY BETTER than all the experts have predicted.

"Moreover, analysts’ estimates on how much corporate America will earn in 2023 have kept falling. Since the end of October, expected profits have dropped 5% to $220.70 a share, data compiled by Bloomberg Intelligence show"

BS.......as usual. YEP.....the good old expert expectations.....which have been uniformly wrong since the pandemic began. YEAH.....these idiots have no ability to predict the markets or the economy.........and as a long term investor why would I care about their short term predictions right or wrong. They are TRADERS.

"While the latest bounce was a headache for money managers who were largely defensively positioned, there are signs that few are willing to embrace the rally. In fact, hedge funds tracked by Goldman’s prime brokerage last week trimmed their long holdings as stocks went up."

Yes.....more BS. I will admit that the bounce has been a HEADACHE for them......yeah because they look like idiots to their clients. I am happy they are not going to embrace the rally......they are short term traders......NOT long term investors.

"I would take the retail enthusiasm as a sign of some exuberance coming back into the market,"

More.....BS. The retail enthusiasm is based on the ability of long term investors to bargain hunt good companies that will no doubt go up nicely over the next five years. This is exactly what a long term investor should be doing.

BOTTOM LINE......as to all the above and all the negative little articles this week.......ARE YOU A TRADER OR AN INVESTOR? The people above are......"traders". There is no way I am going to follow or allow the view of a bunch of traders to influence how I invest or when I invest or what I invest in. Whether the current rally keeps going or hits a hard patch.....I dont care. From here with the FED actions over the next few months being totally known and baked in (yes they will probably do exactly as they have said and go into the mid 5% range)......we are very close to the end of their rate increases. Companies....especially the BIG CAP ones are becoming more productive with cuts.

I will continue to be fully invested for the long term as usual.

 

Here is what we will......ENDURE.....this next week as long term investors.....or for that matter.....any sort of investor.

Inflation data will test 'disinflation' optimism: What to know this week
January's CPI report could challenge the narrative that inflation is trending down across a growing range of sectors in the U.S. economy.

https://finance.yahoo.com/news/stoc...e-index-inflation-retail-sales-172419890.html

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

"The economic calendar is packed to the brim in the week ahead, but inflation data will be most important to investors.

January's Consumer Price Index (CPI) from the Bureau of Labor Statistics is set for release Tuesday will be heavily scrutinized, particularly after Federal Reserve Chair Jerome Powell acknowledged the presence of "disinflation" in the U.S. economy.

Economists expect headline CPI rose 0.5% month-over-month in January, a notable jump from figures seen in recent months. New seasonal adjustments released by the BLS on Friday also switched December's initial reading of a 0.1% monthly drop in headline inflation to an increase of 0.1% in the year's final month.

While the monthly CPI figure likely rose in January, the annual headline number is projected to come down to 6.2% from 6.5% the prior month, consensus estimates compiled by Bloomberg show.

Core CPI, which removes the volatile food and energy components of the report and is closely tracked by the Fed, is forecast to show a 0.4% rise over the month — on par with the upwardly revised 0.4% increase in December.

On an annual basis, economists expect core CPI rose 5.5% over the year, down modestly from the annual 5.7% in December.

Policymakers monitor "core" inflation more closely due to its nuanced look at key inputs like housing, while the headline CPI figure has moved largely in tandem with volatile energy prices this year.

For Chair Powell, shelter inflation — a "stickier" component of CPI that has remained stubbornly high — is a key component of evaluating the path forward for interest rates. In a sit-down interview last week in Washington D.C., Powell said he expects housing inflation to fall in the middle of the year.

"There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case," Powell said last Monday at the Economic Club of D.C. "It will take some time."

The Producer Price Index (PPI) will give Wall Street another sense of how quickly prices are rising with a look at inflation at the wholesale level on Thursday. Meanwhile, the government’s retail sales report due out Wednesday is expected to show continued strength in consumer spending.

Over the prior month, PPI likely rose 0.4%, a jump from a decline of 0.5% reported in December. Economists expect an annual reading of 5.4%, down from 6.2% in December.

Retail sales are expected to have bounced back in January, rising 1.9% over the prior month following a 1.1% decline in December.

On Friday, U.S. stocks finished their worst week of the year after a strong start to 2023. The S&P 500 closed down 1.1% for the week, the Dow Jones Industrial 0.2%, and the Nasdaq Composite 2.4%.

“Given the strong rally to start the year, the market was due for a cool-off period, and we got that this week,” analysts at Bespoke Investment Group said in a note.

Equity markets have rebounded sharply since December on bets the Federal Reserve may pause rate hikes sooner than expected following a steady downshift in recent rate hikes, but officials and strategists have continued to assert excitement around a pivot is premature.

"I’m actually a bit confused about what’s happened in the market," Threadneedle Ventures Founder Ann Berry told Yahoo Finance Live on Friday. "Powell was super clear that rates are going to go up because inflation has not yet come to the point where it needs to come."

"We have our doubts about whether the economy is indeed re-accelerating, but we expect incoming data next week on retail sales to keep the question alive," Bank of America’s Michael Gapen and his team said in a note to clients last week.

On the earnings side, investors are nearing the final stretch of the reporting season. About 69% of companies in the S&P 500 index have reported results as of Friday, with just 69% of that share reporting earnings per share above estimates — below the five-year average of 77%, according to FactSet data.

In the week ahead, investors will get results from headliners including Airbnb (ABNB), Coca-Cola (KO), DraftKings (DKNG), Paramount Global (PARA), and Deere (DE)."

MY COMMENT

WATCH OUT......the media is primed to fear monger the data above any way they can. As usual....nothing.....new going to happen this week.

 

A KILLER open today. I have been out and about doing some errands......but.....I am able to listen to business radio on satellite. So I have been following the very nice open today. The media was getting all wound up last night with the negative futures. I am always glad to see their hopes dashed.

 

I like this little article.....appropriate for the open today.

Five Clues This Isn’t Just a Bear Market Rally

https://www.carsongroup.com/insights/blog/five-clues-this-isnt-just-a-bear-market-rally/

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

"“When the facts change, I change my mind. What do you do, sir?” John Maynard Keynes

"Stocks are off to a roaring start to 2023, which has many claiming this is just a bear market rally and one that will likely end with new lows. Carson Investment Research has quietly been taking the other side to these vocal bears, saying many times that October was likely the end of the bear market and that better times were potentially in the cards. In fact, we upgraded our view on equities to overweight from neutral in late December and added equity risk to the models we run for our Partners as a result.

Two big reasons for our optimism are that we don’t see a recession this year, and everyone is bearish. Regarding the macro outlook, last week’s 517k jobs number does little to change our stance. Additionally, I’ve done this for a long time, and I’ve never quite seen everyone as bearish as they were late last year. Remember, the crowd is rarely right, as we discussed in Is Anyone Bullish?

The S&P 500 is up 17% from the October lows, the same magnitude as the 17% rally we saw last summer. Back then, stocks rolled back over and made new lows, something most strategists on tv are saying will happen again.

Well, the facts are changing for us, and as Keynes told us in the quote above, we had better change our minds as well. So here are five clues that this rally is on firmer footing and will likely continue.

The Trendline

The S&P 500 finally broke above the bearish trendline from 2022. As you can see below, each time this trendline was touched, stocks sold off, usually hard. However, this time, stocks broke above the trendline and accelerated higher, a clear change in trend. Not to mention, the S&P 500 also moved significantly above the 200-day moving average, which clues that the trend has changed.



More stocks are going up.

Even though the S&P 500 is still more than 10% away from a new all-time high, we are seeing more and more stocks making new 52-week highs, yet another sign that this rally, indeed, is different. As you can see below, the first part of last year saw less and less stocks making new highs, a potential warning sign under the surface. Well, today is near 180, with more and more stocks breaking out to the upside. With more stocks strong, the likelihood that the overall indexes follow is potentially quite high.



Wider breadth and participation

Another clue that more and more stocks are trending higher is that more than 70% of the stocks in the S&P 500 are above their 200-day moving average. This is the most since 2021; in other words, more participation than any time we saw last year. As the chart below shows, when this gets above 65%, it signals a potential shift to a stronger trending market. For example, we saw this above 65% for much of the bull market of 2021. Once this broke beneath 65% in late 2021, it was a warning sign of potential trouble brewing.



High beta is doing better.

We saw leadership from things like utilities, healthcare, and staples this time a year ago. In other words, the defensive part of the market. Today we are seeing those groups underperform, with high-beta names doing well, another clue that this rally is on better footing. So let’s sum it up like this, you don’t want the defensive stuff leading to a proper healthy bull market.



The Golden Cross

Lastly, a rare technical development took place last week on the S&P 500, as the 50-day moving average moved above the slower-trending 200-day moving average. This development is known as a “Golden Cross,” which has tended to resolve bullishly for stocks.

Since 1950, there have been 36 other Golden Crosses on the S&P 500 and the future returns have been strong, with the S&P 500 higher a year later nearly 78% of the time and up 10.7% on average, with a median return of close to 13%. The bottom line is that this is another sign that things appear to be improving more than anytime we saw last year.



Taking it a step further, historically, this Golden Cross took place nearly 13% away from all-time highs. We looked, and when Golden Crosses happened more than 10% or more away from new highs, the future returns got better. Higher a year later, 15 out of 16 times (93.8%) and up a very solid 15.7% on average is something most bulls would likely take, I’m sure.



Let’s be clear, after this huge start to the year, and we wouldn’t be surprised at all if we saw some type of weakness or consolidation in February. That would be perfectly normal action after the run we’ve seen, but the bigger picture, we see many clues that this looks like more than a bear market rally, and continued strength in stocks in 2023 is potentially likely."

MY COMMENT

The above is a mix of Technical, Fundamental, and Chart reading. But all in all I totally agree with the bottom line of this little article. We are moving forward.

We have been moving forward since last June. Very few saw it or were willing to talk about it if they did. The power of the negative herd to silence other voices and the power of peer pressure. One big thing to keep in mind as an investor.....the markets and the people that run the markets are the ultimate.....High School Clique.

Lets enjoy a nice day for as long as it lasts.

 

I like this little article.

Looking Back at the Markets in January and Ahead to February 2023

https://blog.commonwealth.com/indep...markets-in-january-and-ahead-to-february-2023

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

"After a tough December, the markets rallied in January. Fears about inflation faded, and hopes that the Fed would hike rates more slowly—or even start cutting them—dominated markets as signs of economic weakness appeared. But this bad economic news was good news, as long-term rates pulled back, supporting financial markets.

Looking Back

Stock markets. For the actual numbers, U.S. stock markets gained substantially for the month, ranging between a 2.93 percent gain for the Dow and a 10.72 percent gain for the Nasdaq, with the S&P 500 in the middle with a gain of 6.28 percent. International markets also did well, with both developed and emerging markets up around 8 percent. Even fixed income had a strong start to the year, with the Bloomberg U.S. Aggregate Bond Index up 3.08 percent.

Interest rates. The reason for the universal gains was a pullback in interest rates. With inflation starting to pull back, and with the headline CPI figure coming in negative for the month, markets started to price in slower rate increases from the Fed. This took the yield on the 10-year U.S. Treasury note from 3.88 percent to 3.52 percent during January—a significant drop. Lower interest rates typically mean higher stock and bond values, and that is just what we saw. Looking back, lower rates appeared reasonable. In fact, the Fed increased rates only 25 bps, instead of the recent, typical level of 50 bps, at its last meeting.

The economy. While financial markets did well last month, the economy continued to show signs of weakness. Consumer spending slowed for the second month in a row at the end of last year. Business sentiment ticked down to recessionary levels, even as housing continued to suffer from higher mortgage rates. Looking back, it appeared that the Fed’s rate increases were indeed slowing the economy, and a recession looked likely in the next couple of months.

Looking Ahead

Job growth. February’s data, however, changed the outlook that supported markets last month. Job growth came in well above expectations, and business sentiment bounced back into positive territory for the service sector. Any recession looks less likely now, especially in the short term, which is good news for the economy. But it will be a headwind for financial markets.

While it appears that inflation will keep dropping, the shockingly strong jobs report at the start of February put the Fed back on edge, and it will likely push rates higher than we thought. This will be a headwind for markets this month, as the decline in rates may pause or even reverse.

Earnings and valuations. Even if rates reverse, there may be some good news. With the economy looking somewhat less weak, earnings may do better than expected. While the current data shows that they are beating expectations, it is by much less than usual. With a stronger economy, those beats may increase.

While earnings are likely to do better against expectations, valuations are likely to adjust down if rates rise again. We should get more color on this as Fed officials continue to comment and as the inflation data evolves. Looking forward, markets may face more headwinds and will likely not do as well as they did in January.

In the short term, the economy appears to be improving, but markets may struggle as the Fed continues to prioritize bringing inflation down. February is likely to be tougher for markets than January was. At the same time, as we look a bit further forward, a strong January has historically been a positive sign for the year as a whole. We can reasonably expect more volatility in the short term, but the longer-term picture remains more positive.

Political and international risks. Beyond the economic and policy angles, February faces challenges from politics. The federal debt ceiling was hit again in January, and the Treasury is now using extraordinary measures to pay the bills. While this will be resolved, it will likely be at the last minute (as it has been before). Until then, the rising uncertainty will also weigh on markets. With the Ukraine war underway and China’s Covid-19 reopening still uncertain, there are multiple risks that will also act as market headwinds this month.

The Bottom Line

Looking back, January had bad economic news but good market results. February may well be the reverse. Even if it is, the prospects for the rest of the year continue to look good. And that is the bottom line here. While we do have headwinds, the strong January reflected real improvements in multiple areas. Looking forward, we should see the same kind of economic resilience over time as those improvements continue."

MY COMMENT

A rational view above.....even if it is perhaps a bit...."wait and see". I actually see the vast majority of content above as very positive for the year 2023 and investors that are long and strong.

 

I assume that means that it will not be shown.....Emmett? BUT.....your film work is like investing....step by step you slowly move forward. If nothing else that is another little piece for your film resume.

I saw a film that I thought was interesting and I thought was well done......"The Menu". I just happened to stumble on it while looking for something to watch on one of my streaming services.

 

An article that is right up my alley.

Executives are doing a great job talking down the US economy: Morning Brief

https://finance.yahoo.com/news/executives-us-economy-morning-brief-100129288.html

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

"Powerful executives running public companies are collectively doing a great job at 1) worrying investors about the path forward for profit and cash flow growth this earnings season; and 2) managing expectations so their business could potentially beat earnings estimates even if the U.S. enters a mild recession in 2023.

And if CEOs sound dreary on earnings calls this reporting season, it’s probably because they have a lot of concerns on their minds.

According to a recent Conference Board survey, "the number one concern for CEOs around the world is the economic downturn and recession." Inflation – also no friend to the top and bottom lines – comes in second.

“What we are hearing from retailers is better than what we heard in the fourth quarter, but it does vary through retailers," XPO CEO Mario Harik said on Yahoo Finance Live (video above). "On the industrial side, quite a bit of strength.”

PepsiCo CFO Hugh Johnston told Yahoo Finance Live that he wouldn’t be surprised if there was a mild recession in the U.S. this year.

"Frankly, we are coming out of 2022 which was just an outstanding year," Johnston explained. “I mean, 14% revenue growth, strong EPS. Obviously, the company is just firing on all cylinders. We have good momentum coming into the year, but we are also aware of the fact in a high-interest rate environment it could start to drag at some point."

Amid the cautious C-suite talk and relatively weak earnings growth, the S&P is up about 6.5% so far in 2023 the year and the Nasdaq is up nearly 12%.

Corporate America may be on to something, however. If we are not at the beginning of a new bull market, then we could be in for a rude awakening at some point in 2023.

“I think at some point we are going to break last year’s lows on the S&P 500 and Nasdaq," Academy Securities strategist Peter Tchir told Yahoo Finance Live. "In particular the Nasdaq, we are going to go through that because everyone got bullish again and we are going to realize oops, this is not as good.""

MY COMMENT

Executives are masters of manipulation of language and strategy to make themselves look good. That is how they got to the highest levels of business. The really great ones are also really successful at actually running a business.

It is not just executives.....it is the short term big bank traders and the entire short oriented Wall Street culture....along with their buddies in the financial media. Everyone has a BIAS and SELF INTEREST that they are pushing.

Well.....everyone except for me and others on here. Long term investors are of no interest to Wall Street. They take us for granted. They demean us. They know they are not going to profit from us. In the older days they would constantly label long term investors as....."buy and hold"......which they considered idiocy. To each their own. I know one thing.....I am not going to get rich by trading, market timing, or jumping in and out, or using leverage. So like everyone......I do what is in my interest and to my personal benefit. That happens to be a long term approach to money and investing.

 

Sounds like you are doing really well Emmett. I would think that acceptance in three festivals would be considered very successful. Congratulations on the new role...another little piece to your resume.

 

The day today......so far.

Stock market news today: Stocks rise after S&P 500 has worst week of 2023
Here's what's moving markets on Monday, February 13, 2023.

https://finance.yahoo.com/news/stock-market-news-today-february-13-2023-120102145.html

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

"U.S. stocks gained Monday as Wall Street clawed back from its worst week of the year so far and an upcoming inflation reading kept investors on their toes.

The S&P 500 (^GSPC) climbed 0.9%, while the Dow Jones Industrial Average (^DJI) advanced 0.8%, or 280 points. The technology-heavy Nasdaq Composite (^IXIC) soared 1.1%.

Sorrento Therapeutics (SRNE) was among big movers Monday morning, erasing more than half of its value after the heavily shorted drugmaker, which was working on a COVID-19 treatment, filed for Chapter 11 bankruptcy protection in Texas.

In the week ahead, investors will get earnings results from headliners including Airbnb (ABNB), Coca-Cola (KO), DraftKings (DKNG), Paramount Global (PARA), and Deere (DE).

On Friday, U.S. stocks closed out their worst weekly performance of 2023 so far. The S&P 500 finished down 1.1% for the week, the Dow Jones Industrial 0.2%, and the Nasdaq Composite 2.4%.

Wall Street is in for an eventful week of economic data with the Consumer Price Index (CPI) due out Tuesday, the government's retail sales report in the queue for Wednesday, and the Producer Price Index (PPI) set for release Thursday.

Economists expect headline CPI rose 0.5% month-over-month in January — a notable jump from figures seen in recent months — while the annual headline number is projected to come down to 6.2% from 6.5% the prior month, estimates compiled by Bloomberg show.

Tuesday's CPI reading will come as investors recalibrate expectations for high interest rates will go this year after Fed Chair Jerome Powell implied in a speech last week that the battle against inflation was in its early stages. For much of the year, many were betting the U.S. central bank would pause its interest rate hiking campaign this year.

The process "is going to take quite a bit of time, and is not going to be smooth," Powell said in a sit-down interview with billionaire investor David Rubenstein at the Economic Club of Washington, D.C., last Tuesday. "We will likely need to do additional rate increases."

"A combination of strong economic data and Fed guidance (January's jobs report and Powell's comments last week, mostly) have convinced markets that rates may be 'higher for longer,'" DataTrek's Nicholas Colas said in a note. "This week’s CPI report will be important in terms of giving the market more information on this key issue."

Last week, the CME Group's FedWatch Tool, which measures market expectations for the federal funds rate, showed the range with the highest probability at the end of the year was 4.50-4.75%, or the current rate. The new modal estimate now stands at 4.75-5.00%."

MY COMMENT

A typical week this week. Some economic data, some earnings.....and a lot of hot air day to day.

My view of what is the primary market mover has been and will be......the Ten Year Treasury Yield.

You know.......as more and more people start to take the positive view of stocks and funds......the current rally will pick up steam. There will be many spurts and sputters in that process. That is called.......A NORMAL MARKET.

ENDURE.....COURAGE.

 

DUH......as I have said many times over the past months. The SP500 has been doing well since June of 2022. We have been in a STEALTH RALLY. It is now starting to be recognized.

Attitudes begin to shift regarding monetary policy, economic growth, and stock prices

https://finance.yahoo.com/news/atti...onomic-growth-and-stock-prices-150443019.html

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

"Stocks declined, with the S&P 500 falling 1.1% last week. The index is now up 6.5% year to date, up 14.4% from its October 12 closing low of 3,577.03, and down 14.7% from its January 3, 2022 closing high of 4,796.56.

Over the past two weeks or so, it seems attitudes have begun to shift favorably regarding monetary policy, economic growth, and the trajectory of stock prices.

1. The Fed acknowledges inflation is coming down

In May of last year, Fed Chair Jerome Powell warned “there could be some pain involved in restoring price stability.” A month later, we learned inflation was unexpectedly heating up again. And then on June 15, the Fed announced an eye-popping 75-basis-point interest rate hike, the largest increase the central bank made in a single announcement since 1994.

Back then, I explained how these dynamics presented a conundrum for the stock market as market beatings would continue until inflation improved in the Fed’s eyes.

Fast forward to February 1, following several months of cooling inflation data, when Powell said at the conclusion of the Fed’s monetary policy meeting: “We can now say, I think, for the first time that the disinflationary process has started. We can see that.“ (Emphasis added.)
“Powell cited the word ‘disinflation’ 13 times in this press conference,” Tom Lee, head of research at Fundstrat Global Advisors, wrote that day in a note to clients. “This is a major change in language and tone and shows that the Fed is now officially recognizing the growing disinflation forces underway. In [the December press conference], ‘disinflation’ was used ZERO times by Powell.”

This is a pretty big deal for the stock market, as prices tend to bottom in the weeks and months before major bullish developments. If this less hawkish tone from the Fed holds, then it’s possible the October 12 low for the S&P 500 was the beginning of the next bull market.

“In our view, Chair Powell is placing more weight on an ‘immaculate disinflation’ scenario, where inflation pressures subside without some softening in labor market conditions, including higher unemployment,” Michael Gapen, U.S. economist at BofA, wrote on Tuesday. “This stands in contrast to the Powell from Jackson Hole, Wyoming, last August, who leaned strongly into doing whatever it takes to bring inflation down and emphasized that inflation was unlikely to subside without some ‘pain’ in labor markets.”

As long as the inflation numbers continue to trend on the cooler side, the Fed seems likely to keep its less hawkish tone.

2. The economy is less likely to go into recession

I can’t pinpoint exactly when the consensus among economists was that the U.S. was due for a recession. The worries certainly intensified after we learned GDP growth was negative in Q1 of last year, and they got a whole lot worse when we learned growth was negative in Q2 as well.

Over this period, I’ve been skeptical of the idea that the U.S. was destined for a downturn given the massive economic tailwinds I couldn’t stop thinking about and still can’t stop thinking about.

Coming into 2023, the baseline expectation for many Wall Street firms was that the U.S. would enter a recession at some point during the year.

But after the robust January jobs report and expansionary January ISM Services survey earlier this month, sentiment among economists has shifted a bit.

On Monday, Goldman Sachs economist Jan Hatzius published a note titled, “Receding Recession Risk,“ in which he lowered the odds of the U.S. entering a recession in the next 12 months to 25% from 35%.

“Continued strength in the labor market and early signs of improvement in the business surveys suggest that the risk of a near-term slump has diminished notably,“ Hatzius wrote.

On Wednesday, we learned the Atlanta Fed’s GDPNow model saw real GDP growth climbing at a 2.2% rate in Q1. This metric is up considerably from its initial estimate of 0.7% growth as of January 27.
On Thursday, The New York Times published an article from Jeanna Smialek titled: “What Recession? Some Economists See Chances of a Growth Rebound.“ The title speaks for itself.

On Sunday, The Wall Street Journal published an article from Nick Timiraos titled: “Hard or Soft Landing? Some Economists See Neither if Growth Accelerates.“ It addresses the same themes.

All that said, it could take a few more weeks of resilient economic data before more economists officially revise their forecasts to the upside.

3. The stock market might not crater in the first half

Many prominent Wall Street strategists warned that the S&P 500 was likely to sell-off sharply during the early part of 2023 before recovering at least some of those losses later in the year. This was driven by the expectation that expectations for earnings would continue to get revised lower.

But there were at least three issues with all this: 1) stocks often rise in years when earnings fall, 2) stocks usually bottom before earnings bottom, and 3) when many people expect stocks to sell-off for the same reason, then that information is likely to be already priced into the market.

The S&P 500 is up 6.5% in 2023 so far, and the index has spent much of this period higher than where it started the year.

At least one top strategist has abandoned his call for an early sell-off. Here’s Goldman Sachs’ David Kostin in a Feb. 3 note to clients (emphasis added):

Recent macro developments have strengthened our economists’ confidence in a soft landing and reduced equity downside risk in the near term. Outside the US, the growth picture in China has brightened following an earlier-than-expected reopening and Europe is now on track to avoid a recession following a warmer-than-expected winter. In addition, Fed Chair Powell this week did little to push back on the easing of financial conditions. Our rates strategists’ expected path of Treasuries suggest little near-term upside to yields. We therefore believe the risk of a substantial drawdown in the near term has diminished, barring unforeseen data surprises. We raise our 3-month S&P 500 price target to 4,000 (-3% from today) from 3,600. As shown this week, still-light institutional investor positioning points to the risk of a chase that would see the market temporarily overshoot our S&P 500 target of 4,000.

Most of the S&P 500 have announced quarterly financial results in recent weeks, and based on what they’ve revealed, it looks like the outlook for earnings may not be as grim as previously anticipated.

“[W]e see no recession ahead in the broad economy — or in earnings — but a soft landing,” Ed Yardeni, president of Yardeni Research, said on Tuesday (h/t Carl Quintanilla). “We are currently estimating that S&P 500 operating earnings will be up 4.7% this year to $225 per share and 11.1% next year to $250.”

The S&P 500 is currently trading above most strategists’ year-end target for the index. Should these gains hold and perhaps improve, we could soon see some strategists revise up their targets."

MY COMMENT

Over this year you are going to see more and more of these "experts" evolve their view to the positive. They will.....of course......ALL claim credit for calling the new BULL MARKET......after the fact.

What I would really like to see is audited investment data for all the financial reporters and experts. I am sure it would be shocking.