And to add to the false banking narrative being pushed. I have seen where they have commented specifically that there were "several" bank failures so far in 2023. I seem to not remember there being "several." According to the FDIC...there have been 2 in 2023. (SVB and Signature Bank.) March Signature Bank, New York, NY PR-021-2023 PR-018-2023 March 12, 2023 $110,400.0 $88,600.0 On Sunday, March 12, 2023, Signature Bank, New York, NY was closed by the New York State Department of Financial Services, which appointed the FDIC as Receiver. On Sunday, March 19, 2023, FDIC entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios with Flagstar Bank, NA, Hicksville, NY, a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, NY. Silicon Valley Bank, Santa Clara, CA PR-023-2023 PR-019-2023 March 10, 2023 $209,000.0 $175,400.0 To protect depositors, on Monday, March 13, 2023, the FDIC transferred all the deposits of Silicon Valley Bank to Silicon Valley Bridge Bank, N.A. a full-service 'bridge bank' that was operated by the FDIC as it marketed the institution to potential bidders. On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank, N.A., with First–Citizens Bank & Trust Company, Raleigh, NC. As part of this transaction Silicon Valley Bridge Bank, N.A, was placed into receivership. (FDIC).
I like this little article........a nice broad look......at some single stock data. Apple & Microsoft May Have Made Portfolio Diversification Impossible. Here's How https://finance.yahoo.com/news/apple-microsoft-made-portfolio-diversification-150514240.html (BOLD is my opinion OR what I consider important content) "While the volatility of a single stock can lead to big winnings if the company takes off, your portfolio can suffer just as easily if that firm has a bad day. Diversification can help you smooth out those lows. At least, that’s the idea. Unfortunately, it may not actually be possible anymore. Today, no matter how diverse your stock portfolio, its value may be largely driven by Apple and Microsoft, according to The New York Times. “Apple, at roughly $2.4 trillion, and Microsoft, at $2.1 trillion, are so large that, taken together, the two companies would be the third-largest sector of the index, behind tech and health care,” wrote Joe Rennison, a financial reporter for the Times. “They would be larger than the energy sector and roughly the size of the financials sector.” In fact, more than 10 cents of every dollar that’s invested in the S&P 500 flow to the market valuations of Microsoft and Apple, the paper reported. The Dominance of Apple and Microsoft Over the past 20 years, the stock market has become increasingly dominated by a small number of high-value technology companies. The tech sector currently accounts for about 30% of the stock market’s entire value. Of that, just six companies make up 20-25% of the S&P 500’s entire value. Collectively they’re known as the FAANG or FAAMG stocks: Facebook (renamed Meta) Apple Amazon Netflix Microsoft Google (renamed Alphabet) Even within this elite group of tech companies, there are clear tiers of success. Meta and Netflix have market caps in the hundreds of billions, $555 billion and $152 billion respectively. Google is worth $1.35 trillion and Amazon $1.02 trillion. But Apple and Microsoft are the true heavyweights of the economy, with market caps of $2.54 trillion and $2.11 trillion, as of April 11. To put it in context, in 2023 the U.S. economy is worth about $23.3 trillion. Microsoft and Apple, with a combined net worth of about $4.7 trillion, make up a fifth of that entire value. What It Means for Investors While the GDP footprint is an issue for economists, the dominance of Apple and Microsoft has created a very real portfolio problem for investors. Every stock to some degree rises and falls based on the market’s overall performance, and that performance is now tied in a very real way to the fate of these two companies. Every investor, no matter how well-diversified, is exposed to losses just because Microsoft had a bad day, even if they have nothing invested in the company. It gets even worse for investors who hold S&P 500 indices. Index funds, particularly funds tied to the overall S&P 500, are a popular investing method. With an average annual return of 10% and market-wide diversification, many advisors recommend an S&P 500 index fund as the go-to strategy for investors who want to balance risk and growth. Yet, someone who holds an S&P 500 fund effectively has about 10% of their money invested in Apple and Microsoft. They have a significant portion of their money sunk into the six collective companies that make up the FAANG/FAAMG portfolios. This has been good for growth over the past 15 years. Those companies have grown significantly, and have bounced back quickly from ugly market events such as the coronavirus pandemic and the collapse of Silicon Valley Bank. That has helped the stock market recover quickly in both cases, even while the economic fallout continued. That success can cut both ways, though. Investors are exposed if either of those companies has a bad day. By occupying 10% of the S&P 500’s market cap, one of these companies can drag down the entire index on its own. When investing in a well-diversified portfolio, an investor may trade off upside potential for protection against downside risk. But right now, it looks like diversification is getting more difficult to achieve. How to Diversify Your Portfolio So, for investors looking for a more balanced portfolio, what’s next? In the short term, there are two good options. Investors who would like to pursue overall diversification can seek out not just a range of companies, but a balance of asset classes. This is often good advice since the stock market will share some systematic risk no matter how its value is distributed. In the case of a market dominated by just two companies, the argument gets even stronger. By holding assets like corporate debt, Treasury debt, real estate and more you can invest in markets that are more insulated from the stock price of Microsoft and Apple. As with all diversification strategies, this may cap your potential gains, particularly if you invest in more stable assets like bonds. Investors who would still like to put their money in the stock market might want to consider specifically investing in other sectors. By investing in industries that aren’t directly tied to the technology sector – such as retail or commodities – you can buy into companies that should thrive regardless of the next big operating system. Bottom Line As tech stocks have grown more valuable, the stock market has gotten more concentrated. Apple and Microsoft now comprise an outsized percentage of the S&P 500’s market cap, and as a result, likely impact your portfolio more than ever before. The dominance of Apple and Microsoft – and tech as a whole – has made diversification more difficult to achieve. However, it’s still possible to construct a well-diversified portfolio with a balance of asset classes and sectors." MY COMMENT This has been reality for a long time now. I choose to simply join them rather than fight them. The one company that I will NOT own in this bunch is META. I also double and tipple up on my big cap tech holdings in my two funds. SO.....I am all in with these dominant companies. I try to achieve a bit of balance with my non-tech holdings like HON, HD, NKE, COST.
That is a good post above Smokie. Language is so critical in financial articles......or for that matter......any news article. When you see a word like "several" used........it is intentional. It is to push a certain narrative. Of course.......it seems like we are losing much of our language skills as a society. BUT......that is another issue way beyond an investing thread.
STILL......a very shallow market today.....mixed at the moment. A better description would probably be.....totally flat.
Since there is nothing going on today...... I want to once again confirm that in the interest of being open in this thread.....ALL......moves that I make are posted on the same day that I make them. To me this is one big issue with online investing discussion.......the lack of real results. Since this is a LONG TERM INVESTING thread I think some of the value comes from being able to see and follow what an actual investor is doing and why they are doing it. This thread will be FIVE YEARS OLD in about five months. It is starting to become a continuous account of.....the long term.
NOW.....on a related topic. I often post various personal data on here......some short term and some long term. On the long term I often report my year to date gain or loss. When I put up that data it is the year to date return of my ENTIRE ACCOUNT......the ten stocks and the two funds. The other data that I put up nearly every day is the result for my TEN STOCKS......versus.....the return of the SP500 that day. This data is ONLY......the ten stocks. NOT....the whole portfolio. WHY do I do it this way? One simple primary reason.......it is irrelevant to me to know how my entire portfolio did each day. What I care about with the ten stocks is......am I beating the SP500 short term and/or long term. If I can not beat the SP500....especially long term......than there is no reason for me to be investing in individual stocks. If I consistently trail the SP500....than I should just be investing all in the SP500. SO.....when I look at the account each day.....I focus on ONLY the ten stocks......NOT the two funds. I can NOT evaluate the performance of my ten stocks if I mix in the nearly 40% of my portfolio each day that is basically the SP500. One of my funds.....IS....the SP500. The other fund....Fidelity Contra Fund.....is an actively managed fund.....but....tends to track the SP500 a lot of the time. So.....when I give my daily result versus the SP500.....it is ONLY the ten stocks.
DEAD markets today......continue. NOTHING going on. BORING....boring, boring. No drama right now since earnings are BEATING expectations so far with the small number of releases to date. My expectation is that earnings will come in better than expected. I think a lot of companies have been doing a ..... rope-a-dope.....job on their forward guidance. Corporate management is very sharp when it comes to lowering expectations and beating expectations. That is how you boost your standing as a company executive. it is all a big game of expectations and looking like a hero by beating what was expected.
We see this little narrative come up from time to time as well. Those at the top...deserve the top. The index itself does the work for you in a "cleansing'" type of way. For example...FB or META as it is now known, used to be a larger percentage at one time, but not so much anymore. Same when TSLA was added. That is just one example out of many others. This is part of the reason the index is so efficient over time. It just simply works. And there are other ways to venture out into other sectors and do different things as the article points to. These folks are always wanting to reinvent the wheel or convince investors to change something, usually through some fear tactic. The real issue is that most of them can't beat the index consistently, so something must be changed. I want the best companies at the top with reasonable percentages whether they are TECH or whatever. If that ever changes, I will simply benefit from the index making the change without having to evaluate more companies. Also, the price (expense ratio) at which one can hold the index is an amazing bargain for any long term investor nowadays.
Of course I am mainly referring to an index that matches the SP 500 or even a Total Stock Index...both are pretty close in performance and very reliable. Hard to mess either of those up. There are many other index funds out there that are very specific and one can find just about anything they want and structured many different ways. So, I wanted to add that just because something is an "index" fund, it still requires an investor to evaluate and understand what the fund does, what's in it, how close it follows a particular index, the expense ratio...read the prospectus. There are a ton of them out there for an investor to look at and study. Make sure it fits your plan and what you are wanting to do. Just being an index fund does not make it safe or productive to your returns.
To continue my discussion today.... EVERYTHING I do as an investor is driven by one thing.....my INVESTING GOALS. This should be the single most critical thing for any investor or trader. Your investing goal is the key to your risk profile, your investing style, your portfolio construction, whether you are a trader or long term, etc, etc, etc. EVERYTHING you do as an investor is to serve one thing......your GOAL.....your investing PURPOSE. I have said many times in here that I have two investing goals: 1. Average at least a 10% total return or better over the long term. 2. Try to beat the SP500. Goal number one is absolute. If I can not do this I should simply NOT own any individual stocks. I can probably achieve goal number one by simply investing in the SP500. Goal number two is aspirational......I do NOT actively trade to try to achieve this goal. I simply use this goal as a measure of my individual investing portfolio result versus what I consider my basic investing goal.....of averaging 10% (SP500). So far over my lifetime.......I am handily achieving BOTH goals. In other words.....my portfolio and investing strategy is achieving my goals. They match up. SO......I never change.....I just do the same thing over, and over, and over. ANY investor or trader MUST have an investing goal that is the basis for everything they do. Every investor is different in their goal......is it to produce income, to save for retirement, to make money as a trader, to supplement income, etc, etc, etc. I have set up my financial life so that I do NOT have to depend on any investment results for retirement income. SO.....I am able to stay fully invested all the time even in retirement. I do not use my brokerage account for retirement needs. My original investing mentor.....my mom....did the same. Her brokerage account was not used for retirement. My dad was a career military officer and had military retirement. After retiring from the military he worked for 20 years till age 74 consulting in his military specialty....so he got Social Security. They also had a paid off home. So they did not need to worry about being fully invested all the time for life with their stock market money. I have followed the same model for my finances.....but from the standpoint of being a private business owner. I have also set up my siblings financial life in retirement the same way. They have multiple retirement income streams.......a pension from a government job, Social Security, an annuity from a deferred comp plan as well as a couple that they purchased and income from being the mortgage holder for both my kids. They now have an income in retirement that is four times the highest income they had while working. I have managed their money for 35 years now and they have no need to ever have to use any funds from their brokerage account. This is great for my kids......since my sibling does not have kids.....and....my kids will ultimately be their only heirs.
One comment regarding my sibling. During their work life as a government worker.....they contributed to a deferred income plan. When they retired they had about $100,000 in the deferred comp plan. That plan allowed them to convert the balance to a lifetime annuity.......or to roll it over into an IRA. When they retired I got a number of private annuity quotes for the same amount of money ($100,000) for a lifetime annuity. Those quotes told me present value of the money ($100,000) and the future payment stream value of the money.....versus what the government lifetime annuity would pay. I was able to use this to compare and evaluate the lifetime income stream value of the deferred comp plan. We found that by converting the deferred comp plan into an individual IRA......and.....cashing it in......and....using those funds to buy a private lifetime annuity.....produced a better pay-out than the government annuity option. If you are a government worker with a deferred comp plan that has a lifetime annuity option......you might want to compare that plan to buying a private annuity when you retire.
I am NOT advocating for having an annuity in an IRA or other retirement account. In fact I am NOT an advocate for annuities in general......other than simple income annuities for people that need to set up a retirement income stream. Anyway......a few weeks ago I got a call from my sibling. They were concerned about the annuity in the IRA needing to have the RMD adjusted as they age. I told them. 1. An annuity company is NOT going to change your monthly pay-out.....even if it is in a IRA with an RMD. 2..The IRS considers the annual annuity pay-out as the proper RMD for your entire lifetime.
GEE......who would have ever imagined this happening. Earnings Season Is Off to Best Start in a Decade, Bank of America Says https://finance.yahoo.com/news/earnings-season-off-best-start-180806637.html (BOLD is my opinion OR what I consider important content) (Bloomberg) -- First quarter earnings have kicked off defying analysts’ warnings for the dreariest season in years, according to Bank of America Corp. strategists. Of the 30 S&P 500 companies comprising 10% of the index that reported results so far, 90% have trounced earnings per share estimates while 73% beat on sales, strategists led by Savita Subramanian said in a research note Monday. That marks the best upside surprise in the first week of a reporting period going back to at least 2012, thanks largely to impressive results from JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co. “Big banks’ solid results despite March’s bank scare helped performance,” Subramanian wrote. “Banks may be tightening credit standards, but larger ones are operating with excess capital versus prior crises.” Strong results from financial heavyweights have helped mitigate fears of an industry crisis after the collapse of Silicon Valley Bank last month. After better than feared results, BofA said its current 2023 EPS forecast of $200, which is below the consensus $220, may be too low if further evidence shows March events were temporary. Still, BofA forecasts downward guidance from companies, noting that earnings revisions have been deteriorating across the board. Last week, strategists at the bank warned estimate cuts could accelerate in later quarters. “A massive, systemic financial confidence shock appears to have been averted, but tighter credit is manifesting in the real economy,” the firm wrote, citing the more prevalent impact of a credit crunch on industrials and consumption. Results expand past financial firms this week, with 26% of earnings due to be released from S&P 500 companies in all sectors except utilities. Demand outlook, margins and the impact of credit on cash use are factors that BofA are eyeing. The bank, itself, is scheduled to report first quarter earnings on Tuesday. Morgan Stanley’s top equity strategist Mike Wilson also said Monday earnings forecasts remain overly optimistic despite recent downward revisions. The Wall Street bear warned declines in estimates will accelerate “materially” in coming quarters on disappointing revenue growth. Meanwhile, BlackRock strategists including Jean Boivin and Wei Li said even with results expected to slump the most in three years, that will not reflect the “coming damage” yet." MY COMMENT Cue the Negative Nannies. We simply can not have this sort of positivity out there in public. Why.......GASP......it might drive some people away from thinking that they need to depend on the so called "experts" for investing advice. Just keep HARPING on the negativity guys......after all you have only been wrong for at least SEVEN QUARTERS in a row now. Reminds me of the current weather forecasters in my area. They are simply right less than 50% of the time. I am more accurate predicting the daily weather by just going outside and looking up in the sky.
I am all packed up and ready to head out to my show tonight. BUT....I have a bit of time to post some. It was a nice moderate gain for me today. Nine of ten stocks UP today. My single loser was GOOGL. No doubt due to the browser articles that were out there today regarding Samsung switching to BING. I did lag the SP500 today......by a tiny.....0.05%. A very nice way to start the week. I have not paid any attention to the markets since earlier today. Looks like we had some strengthening over the last hour or so. WELL DONE MARKETS.
Here is the close today.....BRAVO. Stocks closed higher amid a flurry of earnings https://finance.yahoo.com/news/stock-market-news-today-live-updates-april-17-2023-133610840.html (BOLD is my opinion OR what I consider important content) "U.S. stocks closed higher during Monday's trading session as another round of critical earnings got underway. Investors remain focused on results from financial institutions following the failure of Silicon Valley Bank last month. At the close, the S&P 500 (^GSPC) edged up 0.33%, the technology-heavy Nasdaq Composite (^IXIC) gained 0.28% and the Dow Jones Industrial Average (^DJI) added 0.30%. Bond yields were up. The yield on the 10-year note climbed to 3.597%, while the two-year note yields gained to 4.188% Monday. First Bank (FRBA), Pinnacle Financial Partners, Inc. (PNFP), ServisFirst Bancshares, Inc. (SFBS), and CrossFirst Bankshares, Inc. (CFB) are slated to report after the close Monday, providing more insight on the banking sector." ...... "Earnings season will pick up steam, with another host of bank earnings on deck this week. On Tuesday, Bank of America (BAC), Goldman Sachs (GS), Bank of New York Mellon (BK) will report before the bell; First Horizon (FHN), Western Alliance (WAL), United Airlines (UAL) and Netflix (NFLX) are due after the market closes. On the economic front, the NY Fed Empire State manufacturing survey's general business conditions index rose to 10.8 in April, up from March's negative reading of 24.6. The reading beat analysts expectations of a negative 18.0. As housing data takes center stage, confidence among US single-family homebuilders climbed in April, the fourth-straight month this measure has increased as declining mortgage rates and low inventory bolster demand for new homes, according to the National Association of Home Builders. Next up, housing starts, existing home sales, and mortgage rate and application data are all scheduled for release this week. The data will give investors a clearer snapshot of the housing market amid a slightly softening rate environment. Outside of housing, unemployment and PMI data is anticipated, each of which could provide insight into the Fed’s decision making ahead of its blackout period, which starts on Saturday. Separately, U.S. Treasury Secretary Janet Yellen said during an interview that tighter lending standards following recent bank failures could substitute for further rate hikes. Eight Fed officials are slated to speak this week, and market strategists are waiting to see if they will all agree. Meanwhile, traders are betting that the doom and gloom could be over — for now. The Cboe Volatility Index, or Wall Street’s “fear gauge,” the VIX marked its lowest close on Friday in more than a year. At the moment, traders are focused on earnings rather than the systemic issues following the banking turmoil, Tallbacken Capital Advisors noted. Still, markets have priced in a 86% probability that the Federal Reserve will raise interest rates by another 0.25% in May, according to data from the CME Group." MY COMMENT Another strong end to the day. the markets just refuse to go down. There is some real strength under the day to day markets. I hope the negativity continues.......I love to see the markets climb a wall of worry.
Wednesday will be a big day for me. First, I will get my latest TSLA earnings after the close. I have no real expectations either way. Second, my fabricator will be coming on Wednesday to replace the countertops and backsplash/sidesplash on two secondary bathrooms. We previously did the entire kitchen.....counters and backsplash.....plus the master bath in Quartzite. We also previously did a powder-room remodel in Marble. Now we are going to do both of the other bathrooms in the same material as the master bath and kitchen. I contacted our fabricator about a week ago to let him know if he comes across the right material to do the bathrooms to let me know. I figured it would take at least a couple of months to find the material. Well......it only took a week. So we will be right back to being a little construction zone for a day or two. After this is there is nearly NOTHING left to do in this home. We will probably repaint with a better quality interior paint next year.....our builder-grade current paint is very thin and not real durable. We will also probably replace the under-cabinet kitchen lights.....next year. The lights are currently Halogen and we will replace them with LED. It is nice to be very close to nearing the end to our construction projects. After the last three years.....we now have this house pretty well customized. We purchased this house 3.5 years ago for $800,000. With the BOOM in the real estate market and all of our upgrades we are now worth about $1.4 to $1.5 million. This house will be our forever......old-age.....house. It is a single story with minimal stairs. It is plenty big for the two of us....about 3700 sqft....four bed, 4 bath.......and much more manageable than our former large house.......5 bed, 6 bath with lots of stairs and a pool. The best thing.....the current house is significantly cheaper to do the utilities and upkeep.
LOL....counting a lake-front cabin and an ocean-front cabin......we are currently on house number 10. I am determined that this will be the final house for us. This is the ONLY real property that we now own. We got rid of the ocean-front cabin in 2009 and had previously sold the lake-front cabin in 2000. They were great places and very fun....but with kids no longer at home we were not going to use them much. Plus they were BOTH in Washington state.......and we moved back to Texas in 2000. The ocean-front cabin was on a gorgeous Pacific Ocean beach. The lake-front cabin was located between Spokane and Coeur d'Alene, Idaho......in the pine forested mountain foothills. I loved that lake cabin....it was right out of the 1940's....right on the lake shore with a great sandy swimming beach for the kids. It had a classic 1930's to 1940's kitchen. The only issue with the lake cabin was water. We used a pump system to pump water from the lake to the cabin. The cabin next door had a well so we would fill up at their faucet for drinking water. That area was very difficult to get good water from a well.....solid granite. We put in a well after a few years......we got about 1.5 gallons per-minute after going down over 700 feet. We had one of the best producing wells in our area. At least we had 700 feet of storage in the well pipe....so we never had issues with the low production of the well.
Some nice earnings beats......how is this possible? Johnson & Johnson beats on earnings and revenue, raises full-year guidance https://www.cnbc.com/2023/04/18/johnson-johnson-jnj-earnings-q1-2023.html Bank of America posts first-quarter results that top expectations on higher rates https://www.cnbc.com/2023/04/18/bank-of-america-bac-earnings-q1-2023.html MY COMMENT Of course these companies MUST BE PUNISHED for those results. After all.......it is not nice to embarrass the powers that be on Wall Street. S&P 500 slips in volatile trading as traders digest big earnings https://www.cnbc.com/2023/04/17/stock-market-today-live-updates.html (BOLD is my opinion OR what I consider important content) "The S&P 500 dipped slightly Tuesday as traders digested a slew of earnings reports and their implications for the U.S. economy. The Dow lost 155 points, dragged lower by declines from Goldman Sachs, Johnson & Johnson and other healthcare stocks. Both the S&P 500 and Nasdaq Composite lost 0.2%. Major benchmarks fluctuated as investors assessed the latest batch of key earnings reports. Despite a tough economic environment, Bank of America surpassed first-quarter expectations on the top and bottom lines as rates rose, but shares dipped 1%. Johnson & Johnson’s stock fell 2.6% even after it beat estimates and raised its 2023 guidance. Healthcare stocks Walgreens Boots Alliance and UnitedHealth fell 1% each, also weighing on the Dow. Elsewhere, Goldman Sachs reported lighter-than-expected first-quarter revenue, dragged down by a $470 million hit from its Marcus loans. Shares slumped 2.4%. Despite Tuesday’s move in shares, earnings season has so far proved resilient despite a backdrop of persistent inflation and rising interest rates, with the major averages up since the period kicked off. That could, however, force more hiking from the Federal Reserve come May. “Today’s mood is about profitability concerns [which] may have been overdone for the quarter, but Fed tightening fears won’t be going away anytime soon,” said Ed Moya, senior market analyst at Oanda. “If earnings continue to impress, too much of a good thing will ultimately prove to be inflationary and that will likely mean more Fed tightening.” Even after last month’s dual bank failures sent shockwaves across the sector financial sector, more than 90% of traders anticipate a 25 basis point increase next month, according to CME Group’s FedWatch tool." MY COMMENT NOW the "experts" are concerned about earnings being too good. They have already started to pivot away from the horrible earnings story line to a new line of BS that all these EARNINGS BEATS will be bad because of the reaction of the FED. People MUST BE PUNISHED.......for making them look like FOOLS......once again. Fortunately for them we are just at the start of earnings.....so they can hope that they tank going forward.
I love this little commentary. We are truly living in the.....BIZARRO WORLD......(I refer you to Superman for this reference). Weekly Market Pulse: Much Ado About Not Much https://alhambrapartners.com/2023/04/17/weekly-market-pulse-much-ado-about-not-much-2/ (BOLD is my opinion OR what I consider important content) "I sit down every week to write these updates and sometimes it is a struggle to find something – anything – worth writing about. Sure, there’s always market “news” so I can find something to fill the page and I hope you find it interesting but the fact is that I don’t think any investor – as opposed to trader – should be so focused on the short term. What happens in any given week really just isn’t that meaningful. Markets are always adjusting to the incoming economic data and other tidbits of information but the reality is that most of what passes for “news” is just so much noise. I thought of this today when I was reviewing some of our main economic indicators and noticed that they really haven’t moved all that much over the last year. The average of the 10-year Treasury yield over the last year is 3.4% and we closed Friday at 3.5%. “News” moved it higher and lower over the last year but in the end, it hasn’t changed all that much. The same is true of credit spreads. The difference between junk bond yields and Treasury yields has barely budged in 12 months. The range of the last year is 3.5% to 5.99% and the average is 4.66%. We closed last Thursday at 4.49% (I don’t have Friday’s close but I know it was lower), just below the 1-year average. A year ago, the US Dollar index was at 100.36 and the average over the last year is 105.67. We closed last Friday at 101.58, a mere 1.2% higher than a year ago. And the result for stock prices is not much change. The S&P 500 ETF (SPY) is about 4% above its 1-year average and down a little over 4% from a year ago (total return). There is solid academic research showing that more frequent monitoring of your investments – more information – leads to poorer results. There’s even a name for it: myopic loss aversion. The implications are not insignificant (from the abstract of this paper): Myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently. Two implications of myopic loss aversion are tested experimentally. 1. Investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often. 2. If all payoffs are increased enough to eliminate losses, investors will accept more risk. In a task in which investors learn from experience, both predictions are supported. The investors who got the most frequent feedback (and thus the most information) took the least risk and earned the least money. (emphasis added) I call this the doom and gloom effect because it is the dealers of doom, the peddlers of pessimism who benefit the most from it. The next economic crisis is always just around the corner and any isolated bad event can be spun into a dictum of doom. The latest is the banking “crisis” that could have turned into something bigger but so far hasn’t amounted to all that much. When we look at the Fed’s latest H.8 report – something no one paid any attention to until about a month ago – we see why. It is true that total bank credit has fallen since the failure of Silicon Valley Bank and Signature Bank. You may have to squint but you can definitely see that bank credit has contracted recently. But has it really? The drop is all in the form of reduced securities holdings by banks. Treasuries, agency securities, and MBS are all down from their highs and about 10% from a year ago. But of course that isn’t what has everyone worried. The concern is about a “credit crunch” where banks stop lending into the real economy. And loans and leases are down from their highs (March 15th) by…0.8%. Just for a bit of context, the dollar amount of loans and leases is 2.2 times the size of banks’ securities holdings. And no one was talking about the drop in securities holdings until it became useful to sell newsletter subscriptions. The other concern is with small banks and their vulnerability to a run like the one that swamped Silicon Valley Bank which of course was not small. But the general picture doesn’t change much if you look at credit at small banks. Loans and leases have contracted some, all the way back to where they were in…January. And the drop from the peak is a mere 1.6%. Deposits? Down 0.3% since the beginning of the banking “crisis”. Deposits are down quite a bit from their peak but that was an ongoing process that is nothing more than a direct effect of quantitative tightening. How can it be a crisis if it was expected? One last thing to consider is that some of the drop in securities holdings and loans and leases overall is a result of the banks that already failed. Their securities holdings and at least some of their loans and leases were transferred to the FDIC. In other words, they aren’t in banks anymore and so don’t show up in the H.8 report which is titled “Assets and Liabilities of Commercial Banks in the United States”. I’m not saying there aren’t banks in the US that have problems. There are surely banks that have made bad loans and made poor capital allocation decisions. And I’m not saying that banks are going to keep lending at the rate they were prior to the SVB mess. We know that bank lending standards have tightened. We also know that this change started way before the banking “crisis” hit the headlines. So, sure, you might see some banks start to act more conservatively. But, at least for now, there is no crisis of confidence in banks or anything else. The small change in things over the last year doesn’t mean we should pay no attention to what is going on in the economy or markets. We had some pretty big moves in markets over the last year that were, in retrospect, opportunities for those paying attention. But if you can’t tune out the negativity, if every twitch in the economic data makes you anxious, maybe it would be better to cut back on your market information consumption. Except, of course, for these weekly missives." MY COMMENT A TOTAL tempest in a teapot......the banking crisis. The bigger problem for investors is the FACT that they can no longer trust anything they see in the financial media. The secondary issue is......in my personal opinion......that the day to day markets are manipulated by the big traders and their AI systems. Fortunately the day to day "stuff" is having a problem controlling the underlying positivity of the markets.
