The Long Term Investor

How true.

A bull market is in full swing – and most of us are in denial

https://nypost.com/2023/03/05/a-bull-market-is-in-full-swing-and-most-of-us-are-in-denial/

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

Sucker’s rally! Four months since the stock market began its recovery from last year’s carnage, skeptics are still piling on.

Doubters of bull markets ceaselessly hunt bogeymen. There are the old standbys: the Fed and its rate hikes, inflation and recession.

There are some newfangled distractions, too: Chinese spy balloons, anyone? The noise signals we are, in fact, in the middle of a genuine bull market.

It’s part of a routine behavioral phenomenon I have long called the “Pessimism of Disbelief.” It forms bull markets’ very ramp upward – parallel to but different from the “wall of worry” that bull markets climb.

Let me explain.

Bear markets brutalize with depth, length, or, as in 2022, the sheer magnitude of fears grinding on investors’ nerves.

The resulting scars create a hyperfocus on negatives and dismiss emerging positives as fleeting or illusory.

This Pessimism of Disbelief – or PoD for short – starts with each new bull market, lasting about a third of its full duration. At this juncture, PoD has infected most investors.

A Bank of America survey shows two-thirds of global fund managers see stocks’ post-October climb as a bear market rally, citing fears from inflation to geopolitics to recession.

A survey of eurozone investor expectations is similarly dour.

You’re so vain — you’re probably betting on a recession

The American Association of Individual Investors’ weekly poll shows bullishness up some, but still well below long-term averages.

PoD’s real tell is the “Yeah, but” objection. Yeah, inflation slowed again in January – but less than December.

Yes, economic data look resilient and stocks rose, but that just brings more inflation and the Fed. Sure, improved supply chains cooled freight rates, but increased inventory means rising warehouse costs. Yeah, China reopened, but it’s pushing oil prices skyward.

Disbelief is the first step of psychological denial and a form of grief. While the classic “wall of worry” is simple pessimism about the future, PoD goes a bit further – it’s an anchoring in the past and a form of what behavioralists call confirmation bias – an outright denial of manifest progress and better-than-expected results.

Meanwhile, in this column on Christmas Day, I told you perfection isn’t necessary for rising stocks. They simply need reality to exceed pre-priced expectations. If bad news isn’t bad enough, stocks rise. Happens in every new bull market ever.

Remember 2020? Stocks’ bottomed March 23. Then PoD began.

Why 2023 will be like 1967’s ‘Summer of Love’ for the stock market

Most dubbed the subsequent rally a Fed-driven sugar high soon to be killed by new COVID flareups, government interference, supply-chain chaos or a debt implosion.

Remember 2009’s bottom and the ensuing double-dip talk, the fear of Alt-A mortgage defaults and muni bond wipeouts?

Oldsters like me recall when rising unemployment, recession and automaker layoffs dogged spirits long after October 1974’s bottom. Or late 1982’s worries over tax hikes and weak profits. Stocks didn’t just rise in those bull markets’ gloomy early months – they soared.

Since 1925, median S&P 500 returns six months after bear market lows is 22.8%.

Twelve months? 38.0%. Those early gains are crucial. They compound throughout a bull market’s lifespan —averaging about five years.

Be careful with any “Yeah, but” – yours or anyone else’s. Be sure it’s about fresh concerns and not rehashing old, pre-priced ones.

Instead, heed the wisdom of market legend Sir John Templeton: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”"

MY COMMENT

My opinion......we are at the start of a CLASSIC bull market. They are never recognized or respected in the early months. I believe my portfolio has been in a BULL MARKET since July 2022. BUT....I tend to be an early adapter of tech and other ideas.

When it comes to BULL MARKETS....I can not help being an early believer.....since I an fully invested all the time.

One thing I find very interesting.....over the years....is watching people take months to years to recognize what is going on around them and get back into the markets. They simply become invested in their view and can not see REALITY.

BUT.....to each their own. What anyone else does is IRRELEVANT to me. I am not a follower of the herd.

 

I see by the averages at this moment.....that Powell has started talking. BUMMER,

 

YES.....absolutely typical.

Stock market news today: Stocks fall as Powell tells Congress rates could go 'higher

https://finance.yahoo.com/news/stock-market-news-today-live-updates-march-7-2023-143312540.html

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

"U.S. stocks turned lower Tuesday after Federal Reserve Chair Jerome Powell told Congress that interest rates are likely to go "higher" in the face of persistent inflation.

Shortly after 10 a.m. ET on Tuesday, the S&P 500 (^GSPC) was down 0.9%, the Dow Jones Industrial Average (^DJI) had sunk 0.6%, and the Nasdaq Composite (^IXIC) plopped almost 1%.

Powell is delivering semi-annual testimony to Congress over the next two days — on Tuesday, it is before the Senate Banking Committee, while on Wednesday he meets with the House Financial Services Committee. In prepared testimony Tuesday, he hinted at a sustained central bank campaign to rein in inflation.

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said. "If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes."

Markets have begun to price in at least two additional 0.25% rate hikes from the central bank over its next two meetings; investors began the year with optimism the Fed would stop its rate-hiking campaign as soon as February.

The Fed will kick off its next two-day policy meeting in two weeks, with a policy announcement set for the afternoon of March 22.

Elsewhere in markets, WTI crude oil was little changed early Tuesday, off about 0.5% to trade near $80 a barrel. The 10-year Treasury yield, which has been a focal point of market action over the last few weeks, stood just below 4% early Tuesday.

On the earnings side, results from Dick's Sporting Goods (DKS) early this morning sent shares of the sporting goods retailer up as much as 6%.

The company offered full-year earnings per share guidance that came in more than $1 per share above expectations, according to Bloomberg data. Dick's expects to earn $12.90-$13.80 per share in its fiscal 2023, up from the $12.04 the company earned last year.

Same-store sales in the company's fourth quarter rose 5.3% with CEO Ed Stack telling investors the company's inventory levels are in "great shape" to start 2023.

Elsewhere in single-stock moves, shares of Snap (SNAP) gained more than 9% on Monday and were up another 4% early Tuesday, with Bloomberg attributing the rally to optimism over a TikTok ban in the U.S."

MY COMMENT

One of the most IDIOTIC things I have seen in a long time. WOW.....rates are not done going up. WOW......there might be two more increases of 0.25%. Who would have ever imagined this?

Is there any moron left anywhere in the world that did not already know this? Personally I take it further.....in my opinion we will probably see THREE more increases of 0,25%......and......the final rate will be in the 5.5% to 6% range.

AND......I see the above as.....GOOD NEWS for investors.

 

Today is one of those days when the markets are disconnected from REALITY. It is all about the SCREAMING headlines. SO......I will simply move on and ignore it all.

I am not saying that the markets are doomed today. There is probably about a 50/50 chance they will end the day positive.

BUT.....the process of getting to the end of the day today......up or down.....is vivid lesson in investor STUPIDITY. Although.....we all know....well I hope so.....that this short term trading stuff that we are seeing today is just that.....AI driven short term trading.

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

 

I do enjoy the media jerking everyone around today and helping manipulate the short term trading for the big boy....traders. It makes me laugh. The markets today are EXACTLY as I expected.

BUT....I see that I am doing just fine......a loss at this moment of 0.08%........basically nothing. Four stocks UP today and six down.

My year to date gain at this moment....between 9% and 10%.

 

Today was absolutely media frenzy driven. What is amazing to me.....well not really after 50+ years of investing....is that there are enough people selling today on this.....OLD NEWS.....to move the markets. Do I really care as a long term investor....NO.

I had a moderate loss today in my stocks. I had only a single UP stock today....COST. Way to go Costco. BUT...I did significantly beat the SP500 today....by 0.68%. So I will have to just be satisfied with that and move forward.

 

Since Powell said exactly what he has been saying for probably about a YEAR now.........and nothing has changed.....I have no comment. I have said everything I can possibly say about this subject, in this thread, for months now. I have nothing new to add to something that has not changed in the slightest. So.....anyone that wants my opinion of Powell and the rate increases over the next 3-6 months.....I refer you to the hundreds of comments I have already made.

BUT....you have to admit it is fun to watch the lemmings run......as soon as the media flips the switch.

What is really SAD......is either what the media is saying is true......and.....all the economists and professionals were shocked and surprised by what Powell said. In which case this is obvious PROOF that they are delusional and totally out of touch with reality. If that is the case than how in the world did any of them become leaders, professionals, etc, etc, etc.

The other option.....is that they all know the truth and there was no surprise in what Powell said today........and when they say otherwise they are BS'ing....their clients, customers and everyone else. Of course this is where they rake in the money for themselves with short term, AI, trading models.

Either way........it is basically financial malpractice.

 

We once again see the inherent STRENGTH in the markets today. The averages are all green after the short term trading frenzy and media freak out yesterday over the Powell testimony.

They are lingering just in the green as they await.....once again.....the pronouncements from Powell. Is there anything he can say today that he did not say yesterday? Is there anything he can say today that he has not said a thousand times over the past year?

 

Your post above Emmett.......I was imagining:

A pounding knock on the door late last night. I drag myself out of bed, disoriented. As I head to the door, suddenly a swat team smashes in the door with shouts of......FED, FED, FED. They drag me and my wife out onto the yard not even allowing us to get dressed. "Get down, get down A'holes.....dont move". We were quickly zip tied.....and left laying on the sidewalk surrounded by an army of fully armed agents with AK's and full body armor.

A caravan of giant black SUV's pulls up with flashing strobe lights. Agents in dark suits and sun glasses.....even though it was nighttime......pile out and opened the back door of the middle SUV. Even though I was pined to the sidewalk by a knee to my back....I could see the man in the dark suit exit the SUV........It was POWELL. He sneered at me as he walked over......."You got something to say to me WXYZ"?

 

This might actually be good news today.......for the medium to longer term.

Retail executives spent last year getting inventories in 'great shape': Morning Brief

https://finance.yahoo.com/news/reta...s-in-great-shape-morning-brief-102911205.html

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

"The retail business is simple — buy from wholesalers, sell to consumers, pocket the difference.

In exchange for capturing this difference between the wholesale and retail cost of goods, retailers take on the financial risk of fronting money to one party while working to make it back and then some from another.

At the scale of the U.S. consumer economy, the differences between an additional week in a quarter, an additional weekend in a month, or even an additional day in a year can be millions of dollars or more.

And if the timing of a day or two can disrupt the financial fortunes of a business — meaning there can be just hours between profits and losses — then one can imagine the challenges faced by retailers during the supply chain disruptions that results from the pandemic.

In 2021, the story was that retailers were unable to match consumer demand as the economy re-opened. In 2022, supply chains that got unstuck eventually left retailers with more stock than they needed.

As 2023 gets underway, retailers are suggesting the balance may finally be just right.

Sporting goods retailer Dick's Sporting Goods (DKS) reported fourth quarter results Tuesday morning that impressed investors, with shares rising 11% after the company offered a full-year earnings forecast well above expectations. And driving this profit forecast were inventories that are in "great shape" ahead of the company's busy spring season.

"As planned, we continued to address targeted inventory overages, and as a result our inventory is in great shape as we start 2023. We couldn't be more excited about our spring assortment," said Lauren Hobart, president and CEO.

Dick's CFO Navdeep Gupta added on a call with analysts Tuesday morning, "We were chasing inventory last year amidst industry-wide supply chain disruptions. ...Compared to Q4 of 2019, a 38% increase in sales was well ahead of our 29% increase in inventory. Our inventory is healthy and well positioned."

Looking at economy-wide data, we can see inventory-to-sales levels are still depressed relative to pre-pandemic levels. Though this measure is in part driven by strong sales, which keeps the ratio of inventories to sales low.

Still, comments from Dick's were the latest echo of a refrain heard often from the industry as retail results have poured in over the last few weeks. And that refrain says the industry is finally finding something like a "normal" setting after three pandemic-altered years.

Back in late February, Walmart (WMT) CEO Doug McMillon said his team, "acted quickly and aggressively to address the inventory and cost challenges we faced last year."

"We ended the quarter with inventory about flat to last year which is better than we anticipated and even better when you consider how inflation lifts that number," McMillon added on a call with analysts. "And [we] did it while improving in-stock levels."

McMillon added: "And so as we look at where we are today with much better position around inventory...I feel like this year will be more of a normal environment for markdowns or certainly more normal than what it was last year."

The company did, however, say there was "work to be done" on its apparel inventory levels.

But clothing retailers Macy's (M) and Nordstrom (JWN) both indicated in their latest reports inventory levels continue to improve.

"Despite an increasingly volatile macroeconomic climate, through the ongoing execution of our Polaris strategy, we remained agile, pivoted to meet customer demand and elevated our approach to inventory management,” said Jeff Gennette, Macy's chairman and CEO. "In the fourth quarter, we benefited from our disciplined inventory approach."

The company reported inventory levels that were down 3% from last year and said, "Inventory productivity continues to be a focus for the company in 2023 and beyond."

Nordstrom, for its part, said inventory levels were down 15% from last year and at levels similar to those that prevailed in 2019, the last year before the pandemic.

"We took decisive actions to right-size our inventory as we entered the new year, positioning us for greater agility amidst continuing macroeconomic uncertainty," said CEO Erik Nordstrom."

MY COMMENT

We should be as recovered from the economic shut-down......as we are ever going to be...... some time within the next 12 months. It has been a long slog.

Much of the impact on society and business will never be recovered. BUT.....that is the past and we will just move on from here.

 

I see this as the lead article on one of the sites that I read. BUT......WTF.......why is this even news at all?

U.S. private payrolls increase in February -ADP

https://finance.yahoo.com/news/u-private-payrolls-increase-february-132535316.html

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

"WASHINGTON (Reuters) -U.S. private payrolls increased more than expected in February, pointing to continued labor market strength.

Private employment increased by 242,000 jobs last month, the ADP National Employment report showed on Wednesday. Data for January was revised higher to show 119,000 jobs added instead of 106,000 as previously reported. Economists polled by Reuters had forecast private employment increasing 200,000.

Though unreliable, the ADP report was consistent with labor market tightness. Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that the U.S. central bank would likely need to raise interest rates more than expected and opened the door to a half-point rate hike this month to combat inflation, following a recent raft of strong economic data.

Job growth was robust in January, with the unemployment rate falling to a more than 53-1/2-year low of 3.4%. Consumer spending rebounded strongly and inflation picked up in January.

The ADP report showed hiring continuing to be concentrated in the services sector, which added 190,000 jobs last month, most of them in the leisure and hospitality industry.

There were also gains in the financial activities, education and health services, information, and trade, transportation and utilities industries. But professional and business services shed 36,000 jobs.

The goods-producing sector added 52,000 jobs, with manufacturing creating 43,000 positions. But construction payrolls decreased by 16,000 jobs.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the Labor Department's Bureau of Labor Statistics' more comprehensive and closely watched employment report for February on Friday.

It has been a poor gauge in forecasting private payrolls in the BLS employment report. The ADP initially reported 106,000 private jobs were created in January, a fraction of the 443,000 surge in private payrolls estimated by the BLS.

"The ADP claimed that the January weakness was due to unseasonably severe winter weather in California during the survey week, but the strength of the official payroll figures strongly implied instead that the unseasonably mild winter in the Northeast was the dominant factor," said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

According to a Reuters survey of economists, private payrolls likely increased by 213,000 jobs in February. Total nonfarm payrolls are forecast rising by 203,000 jobs last month after surging 517,000 in January.

"We don't think we should view the ADP report as a particularly reliable signal regarding Friday's BLS report," said Daniel Silver, an economist at JPMorgan in New York."

MY COMMENT

A RARE bit of TRUTH in this little article. This information is....."unreliable". It is often extremely wrong. It is not a reliable signal. It has a history of being a poor forecasting guage. Etc, etc, etc.

YET.....here it is being put out there as a lead story. I have seen this data in the media many, many, times over the years. NEVER......have I seen a word until now....about how unreliable this data is. SHAME, SHAME, SHAME.

How many of the other economic data sources and statistics that we see in the media every day.....are simply wrong or useless as predictive tools? I suspect that many of them are in reality....WORTHLESS. The lesson for any investor......never rely on this stuff as a basis for your investing decisions.

 

So far stocks in the form of the SP500 and the NASDAQ are giving the middle finger to the fear mongers that are pushing the Powell testimony today. Good for them.