The Long Term Investor

Here is the short week this week. BUT......the data for the SP500, NASDAQ 100 and NASDAQ does not contain the very small gains of Monday. For some reason the site I use did not include Monday.

DOW year to date +1.77%
DOW for the week (-1.96%)

SP500 year to date +14.57%
SP500 for the week (-1.27%)

NASDAQ 100 year to date +37.54%
NASDAQ 100 for the week (-0.86%)

NASDAQ year to date +30.52%
NASDAQ for the week (-0.92%)

RUSSELL year to date +5.87%
RUSSELL for the week (-0.90%)

MY year to date for my ENTIRE portfolio as of the close today........+32.27%. My year to date one week ago.....+33.87%. Year to date change this week.......(-1.6%)

 

Have a GREAT weekend EVERYONE. I know I will.

No shows for me this weekend.....so we will be doing a RARE rehearsal. We will make up for it next week with four shows.

 

I recently briefly mentioned the ridiculous NFT craze from a year or two ago. Here is another BIG JOKE.

Lessons From the Catastrophic Failure of the Metaverse
Did the “creative class” learn anything from buying into a product that was obviously destined to flop?

https://www.thenation.com/article/culture/metaverse-zuckerberg-pr-hype/

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

"There was a time, not so long ago, when every major architect on this planet was “building” in the Metaverse, the brand name for the open-world virtual reality platform and associated projects under the aegis of Mark Zuckerberg’s Meta. Last year, some staggering names such as Zaha Hadid Architects, Grimshaw, Farshid Moussavi, and, of course, the Bjarke Ingels Group pledged to create “virtual cities,” virtual “offices,” and equally vague sounding “social spaces” to be funded with cryptocurrency and supplied with art (NFTs). The eagerness to latch onto whatever the newest trend the increasingly desperate and failure-prone tech industry dished out was so palpable that even real-life developers like hotel chain CitizenM and brands like Jose Cuervo got involved and threw what one presumes is a whole lot of actual money at the enterprise. The rush to move into virtual real estate was a full-on frenzy.

In some respects, who could blame these companies and firms? Since the virtual reality service’s launch in 2021, the so-called “successor to the mobile internet” became the recipient of a kind of soaring hype few things are ever blessed with. According to Insider, McKinsey claimed that the Metaverse would bring businesses $5 trillion in value. Citi valued it at no less than $13 trillion.

There was only one problem: The whole thing was bullshit. Far from being worth trillions of dollars, the Metaverse turned out to be worth absolutely bupkus. It’s not even that the platform lagged behind expectations or was slow to become popular. There wasn’t anyone visiting the Metaverse at all.

The sheer scale of the hype inflation came to light in May. In the same article, Insider revealed that Decentraland, arguably the largest and most relevant Metaverse platform, had only 38 active daily users. The Guardian reported that one of the features designed to reward users in Meta’s flagship product Horizon Worlds produced no more than $470 in revenue globally. Thirty-eight active users. Four hundred and seventy dollars. You’re not reading those numbers wrong. To say that the Metaverse is dead is an understatement. It was never alive.

In retrospect, that’s not surprising. If you are wondering what the point of the Metaverse is—business meetings? parties? living out a kind of late-’90s Second Life fantasy but without legs?—you are not alone. In fact, no one, even Zuckerberg himself, was ever really clear what the whole enterprise was for except being the future of the Internet and a kind of vague hanging out. And yet, that use case dilemma didn’t stop our profession from dragging their tongues on the floor in search of a quick press release or blurb to show that they were, after all, on the cutting edge of all things.

The Ford Pinto–esque failure of this enterprise, finally put to bed by Zuckerberg himself in May, cost people their jobs, investors their money, people their time. It should cost McKinsey, Citi, Meta, and all the folks in architecture eager to jump on the bandwagon more than a little of their prestige or dignity. But as we saw with NFTs and cryptocurrencies before the Metaverse and the similarly overblown rise of generative AI after, even in the face of such alarming patterns, not much seems to change.

For a field expressly rooted in the construction of real spaces, architecture sure betrays a desire worth interrogating to latch onto the latest ephemeral tech trends. This desire, it should be noted, is applied unevenly among virtual spaces and ideas. Virtual reality is itself far from useless for architecture. When I was studying acoustics in graduate school, designers spent a great deal of effort on creating spatialized sound to be used to sell services to clients, and to even preview what a space would sound like before it was built. Museums have been adding virtual reality elements as a teaching tool since the technology became available. Virtual social space itself is hardly a new idea—it’s pulled from science fiction and, later, the utopian dawn of the Internet, which imagined it as a kind of boundless, egalitarian, free commons. In our contemporary, monetized version of the net, Zuckerberg does have a point: People want to spend time in virtual spaces and they are important for socialization. Just not his virtual spaces.

If you ask kids what kinds of spaces they find themselves in, they won’t say Horizon Worlds. They’ll say Roblox (the controversial monetized game-design platform), Minecraft (an open world building video game old enough that I played it as a teenager myself), and Fortnite (a player-versus-player combat game with a great deal of customization.) Brands know this; many like Gucci and Nike have begun staging events and product launches in these virtual spaces, trying to capitalize on younger and younger eyeballs. But aside from a typical remark from Ingels that “architecture should be more like Minecraft” (i.e., playful like a video game), architecture—a highly professionalized world whose leaders, like Ingels, are in their 40s at their youngest—hasn’t paid much mind.

It makes sense, then, that what is in reality a highly stratified capitalist enterprise (that just happens to also be considered an art) wouldn’t see all of the exciting things bubbling beneath the surface in other parts of culture, like music and fashion. They instead see press releases from colleagues in the same insular, professionalized spheres: McKinsey, Meta, and PR agents.

But perhaps I am being too generous. The simple answer might just be plain old cynicism. In the social media age, architecture has increasingly gravitated toward PR fluff that doesn’t require making buildings or theory, the two central pillars of architectural production for millennia. While PR has always existed in the field (House Beautiful magazine anyone?) the short attention spans of the content creation era have all but guaranteed that the easiest way to get notoriety in or via a publication is to “create” just that: content (images, renderings, perhaps a 3D city in a program like Blender or Rhino). For added relevance, simply attach this content to whatever the issue—or product—du jour is. Climate change, the pandemic, the Metaverse. I’ve come to call this practice “PRchitecture.”

However, the astonishing size of the Metaverse’s failure; the consistent mocking it’s been subjected to; the disparity between the figures quoted by marketing and consulting agencies and reality; and the actual, insane amount of money involved should serve firstly as a overdue humiliation and secondly as a wakeup call.

It is objectively embarrassing for the field of architecture to have tied itself to such a ridiculous fad that anyone with any common sense could see was both pointless and highly reviled by the public. But more importantly, the tech industry in its current iteration—which increasingly looks like a never-ending cycle of intangible hype bubbles at its best and financial scams at its worst—is no friend of architecture. It will not provide anything of lasting value or of considerable productiveness to society. The cycles of boom and bust are getting shorter and shorter and the wares being hawked more and more financialized and unstable.

The tech industry does not like architecture or the arts. It profits off of them, but, as we have seen with the labor implications of AI, is openly hostile toward the creative process and will stop at nothing until all labor and all things produced by it—from concept art and movie scripts to taxi rides and architecture—is overseen by its middlemen and thus gutted of its so-called “disruption.” The sooner architecture realizes this, the better off the field, its practitioners, and the people who work for it will be.

But then again, that doesn’t get so many clicks on Instagram, does it?"

MY COMMENT

The Metaverse.......one of the most IDIOTIC and poorly executed ideas to come out of big tech.

This is why I will NEVER own Facebook.....oh, excuse me......Meta. With the absolute control of the company that ZUK has with his voting rights over all other shareholders.....this company is subject to his whims. I simply don't trust the guy to have any clue what REAL humans want or need. His instincts, personality....or lack of it.....aloofness from the world, inability to connect with people,......make him worthless as a predictor of what a REGULAR PERSON might want to use in their daily life.

In addition....you simply had to take a quick look at this product.....yes it was and is a product.....to see that it was a BIG JOKE. The level of sophistication was below the level of an 8th grade cartooning class. ALL hype, all PR, classic emperor with no clothes.

YET......as always......all the usual suspect "EXPERTS"......jumped on board. How can a trillion dollar company produce such out of touch garbage? I will tell you.....no one has the guts to stand up to ZUK. What can I say.......the guy is a social MORON.

All anyone had to do is put together a focus group of.....REGULAR, EVERYDAY PEOPLE. If they had done this and taken a few steps outside the big tech insider bubble....they would have canned this idiotic project within about one day of the idea being proposed.

I will say.......the Metavertse did end up having real entertainment value.............at least to me......I found it hilarious. it was a very entertaining episode to watch in business insanity.

 

And......speaking of MORONS.

The economy's doomsday clock has been reset
Wall Street's fearmongers were totally wrong about a recession

https://www.businessinsider.com/wal...rket-crash-calls-wrong-economy-housing-2023-6

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

"Wall Street analysts and economists have always had a tendency to fall in love with their forecasts. They don't like to admit when they're wrong, and even as the evidence against them piles up, many stick to their guns. This stubbornness helps explain why Wall Street is having an exceptionally hard time letting go of the idea that a recession is just around the corner.

As the forecasts for recession keep failing to come true, the explanations for this delay are always explained away. Strong jobs growth? It's a late-cycle sign that the end is nigh. Rally in US equity markets? We had a big rally in mid-2008, too. Housing picking up? It's only because inventory is low.

Despite the year-plus in which analysts have been arguing that a recession is imminent, none of the arguments behind the predictions stand up to scrutiny. And there's only so long one can keep claiming that the recession is just six months away. Given the increasing number of reasons to be upbeat on the US economy, it's time for the recessionistas to admit defeat. The economic doomsday clock has been reset.


Bear growls
Over the past year, Wall Street pessimists' reasons for an approaching recession have shifted. First, it was the spike in food and energy prices, then it was the housing market, and now it's "long and variable lags" from rate hikes that many of the same people said the economy couldn't handle in the first place. Despite the moving goalposts, it's important to get a sense of the bears' current arguments to better understand why the calls for economic doom are overblown.

One of the popular indicators for recessionistas is the slowdown in bank lending. The data shows that banks are increasing their standards of who qualifies for a loan, meaning fewer people and businesses are getting access to credit. As this spigot of money gets cut off, the argument goes, retail spending and business investment will drop off — cutting off the main driver of economic growth. I think there are a couple of issues with this line of thinking.

First, bank lending is a lagging indicator: The growth rate of money loaned out tends to peak when the country is already in a recession and bottom out after a recovery has already started. For all we know, the slowing in bank lending is a response to the slowdown in growth last year and tells us nothing about the future. Second, lending standards on loans for small, medium, and large businesses have been tightening for the past four quarters. But that doesn't seem to have put a dent in the economy, which has generally performed ahead of expectations during the same period.

This disconnect between lending and the actual performance of the economy could be because the post-pandemic cycle is being driven by higher incomes instead of increasing credit balances. Americans received sizable pay raises and plenty of pandemic stimulus that they could lean on — not needing to charge everything to the credit card. As evidence, bank loans as a percentage of GDP is roughly equal to where it was in 2016, meaning increased debt has not been the driver of activity for roughly seven years.

What about the claims that America's job market is spiraling downhill? Growth pessimists have recently begun pointing to the increase in the number of people claiming unemployment insuranceas a sign that the long-resilient labor market is turning for the worse. Typically, they say, whenever claims rise this much from their 12-month lows, a recession follows.

Again, there are issues with this approach. For one, the initial claims data has not been especially clean — there have been noted data issues, and sharp increases one week get revised away the next. But even if we take the data at face value, it's worth noting that there's a disconnect between initial jobless claims — people who are filing to receive benefits — and continuing claims, which measure who's actually getting them. Continuing claims have not risen nearly as much as one would expect given the rise in initial claims, which indicates people are finding new jobs relatively quickly. And other labor-market data remains strong. Layoff announcements have slowed considerably, especially in the tech industry, and the total layoff rate remains low. Finally, despite the recent uptick in initial claims, the monthly jobs reports have remained surprisingly strong.

Bears are on a bit firmer ground when discussing the weakness in the commercial real estate sector, but even there, I'm skeptical the issue is nearly as bad as is being portrayed. Structures investment — which includes spending on nonresidential buildings such as strip malls, offices, lodging, and power plants — is less than 3% of the US GDP and only a part of that is the problem. Office real estate gets most of the attention given the stickiness of remote work and the lack of occupancy in downtown urban centers, but office construction is actually a small share of commercial real estate these days. Power and manufacturing make up a bigger chunk of the sector's investment, and these areas are seeing private investment crowd in because of federal fiscal policies such as the CHIPS Act.

While the case for a sudden slowdown in the economy is complicated and full of holes, the argument for a strong rest of 2023 is pretty straightforward.

Blue skies

As the labor market holds strong, consumer-price inflation is cooling rapidly. Food and energy bills are sliding, used-car prices are likely to drop this summer, and the once soaring cost of rent is coming off the boil. This represents a tailwind for household incomes and consumer spending.

The drag from the US housing market is fading. The housing sector sliced off nearly a full percentage point from the GDP over the past year, but there are clear signs the once battered industry is staging a bounce back. New-home sales have hit one-year highs. Surveys of homebuilders show that they are upbeat despite an increase in mortgage rates — which is notable since changes in builder sentiment tend to presage the direction of real-estate investment over the following few quarters.

Similarly, inventories that have been cutting GDP growth over the past year will likely turn around. Businesses built up a stockpile of goods during the worst of the supply-chain crisis in 2021 and 2022 and have been slowly selling off that glut over the past year. Without the need to order new goods, this inventory buildup contributed to the slowdown late last year. If consumer spending holds up, as it looks like it will, firms will need to restock inventories, which will, in turn, support US factory production and investment up the supply chain.

Another check in the "continued growth" side of the ledger is the improving outlook for financial markets. This time last year, stocks were in steep decline, corporate-debt markets were showing signs of stress, and the dollar was climbing, which made it harder for American companies to export their goods. In short, markets were anticipating recession, creating a negative feedback loop for the economy. This year, market developments have moved in the opposite direction. Importantly, the Federal Reserve has started to slow its aggressive interest-rate-hiking plan and has signaled that it doesn't expect the economy to buckle in order to achieve its inflation-fighting goals.

These positive factors don't exactly scream "recession." A popular quip last year was that "housing is the business cycle" or that "housing is the quintessential leading indicator." Well, housing is clearly accelerating. That is no longer a disputable point. Growth pessimists tend to put quite a bit of currency behind the idea that the Federal Reserve's interest-rate hikes will have "long and variable lags," meaning the tightening will take awhile to kick in before it sends us off the cliff. But the Fed has already been tightening for 18 months, and it's the interest-rate-sensitive areas of the economy that have shown improvement of late — if anything, the economy has already digested the hikes and moved on.

Heads, I win. Tails, you lose

Growth pessimists seem to lack logical consistency in their views. Their arguments are constantly contradicting: "Growth is holding up, which means the Fed must hike interest rates even more, which is bad for stocks." "Actually, growth is weak, and the Fed has already hiked interest rates too much, which is bad for the economy and stocks." Another concern about the market is that the stock-market rally is the result of only a few companies, which is a bad sign. But in 2022, the stock market was selling off while breadth — a measure of companies whose stocks are moving higher — was better, but this was also bad. Most recently, economic doomsayers argued that defaulting on the debt would be bad, but once the debt limit was resolved and the Treasury General Account was refilled, it was also bad because that meant the issuance of new Treasury debt would attract investors away from stocks.

It's starting to make my head hurt! At some point, rational people have to put their hands up and say, "You are wrong."

There is opportunity in this intransigence, however. If the consensus continues to have a tough time letting go of the recession forecast, that means stocks have room to grind higher as forecasts continue getting revised up and investors slowly come around to the potential of the economy's continued improvement.

But by the time analysts start to come around, the damage will have been done. The recession calls have put the idea of a slowdown at the top of investors' minds for over a year, and people who sold or got defensive with their portfolios will have missed out on strong market gains this year. The economists and forecasters who banged the doom drum may take a reputational hit, but that's nothing compared to the financial confusion they've caused for average investors.

My broader point is simple. The near-term recession risks are fading rapidly. There will be no recession in the next six months, and it's increasingly likely that we won't see one in the next year, either."

MY COMMENT

Please click on the original article for the charts that do not copy. There are many good charts in the article that illustrate ALL the above.

The bottom line is summed up in the following quotes:

"There is opportunity in this intransigence, however. If the consensus continues to have a tough time letting go of the recession forecast, that means stocks have room to grind higher as forecasts continue getting revised up and investors slowly come around to the potential of the economy's continued improvement."

AND

"But by the time analysts start to come around, the damage will have been done. The recession calls have put the idea of a slowdown at the top of investors' minds for over a year, and people who sold or got defensive with their portfolios will have missed out on strong market gains this year. The economists and forecasters who banged the doom drum may take a reputational hit, but that's nothing compared to the financial confusion they've caused for average investors."

This topic is a perfect example of why the Metaverse FAILED and why all the experts have been totally wrong on the economy, the markets, and recession......A LACK OF COMMON SENSE.

The ability to apply and use COMMON SENSE.......and.....see REALITY...... is the greatest super-power that any investor can have.

 

Here is the week that starts tomorrow. As usual the EARNINGS will start with many.....banks, banks, banks.

Inflation data, bank earnings

https://finance.yahoo.com/news/inflation-data-bank-earnings-what-to-know-this-week-150937772.html

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

"Inflation data and the start of second quarter earnings season await investors in the week ahead with markets expecting a solid crop of results in the coming weeks and another rate hike from the Federal Reserve later this month.

Wednesday morning will feature the Consumer Price Index (CPI) for June, with June's Producer Price Index (PPI) out Thursday, and the initial July reading for the University of Michigan's consumer sentiment index on Friday.

The week will close with some of America's largest financial institutions, including JPMorgan (JPM), Wells Fargo (WFC), Citi (C), and BlackRock (BLK), kicking off second quarter earnings season.

Markets enter the week after a shortened trading week saw stocks edge lower as the June jobs report reflected a "lukewarm" US labor market, but with the economy adding more than 200,000 jobs last month another rate hike from the Fed — or more — is all but certain.

Stocks enter second quarter earnings season after a strong first half of 2023, with the tech-heavy Nasdaq (^IXIC) leading gains, rising more than 30%. The benchmark S&P 500 (^GSPC) is up nearly 15% while the Dow Jones Industrial Average (^DJI) has risen just 1.7%.

Friday's jobs report showed the US economy added 209,000 jobs in June, missing Wall Street estimates and reflecting a slowdown from the previous month, data from the Bureau of Labor Statistics showed Friday.

The unemployment rate now stands at 3.6% while hourly wages rose 4.4% over the same month last year.

Economists and market strategists were largely in agreement that although nonfarm payrolls decreased from May, the 0.1% drop in unemployment and a continued increase in hourly wages warrant additional action from the Fed.

"The Fed would need to see more evidence of a sustained cooling of wage growth for it to stay on the sidelines," economists at Oxford Economics wrote on Friday. "That was not evident in the latest jobs report, which included another month of sturdy wage increases. Workers are still in the driver’s seat as labor conditions, while easing, remain historically tight."

Entering the week, data from the CME Group showed investors pricing in a ~93% chance the Fed raises rates this month and a roughly 40% chance at least two more 0.25% rate hikes are announced by the central bank through November.

This week will shape expectations around the Fed's longer term plans, with CPI data expected to show a continued slowdown in inflation pressures. Wall Street economists expect headline inflation rose just 3.1% annually in June, a slowdown from the 4% rise seen in May. May's data was the slowest year-over-year inflation reading since April 2021. Prices are set to rise 0.3% on a month-over-month basis.

On a "core" basis, which strips out food and energy prices, CPI is forecast to rise 5% over last year in June, a slowdown from the 5.3% increase seen in May. Monthly core price increases are expected to clock in at 0.3%.

"We look for the core CPI to downshift alongside a decline in core goods prices," Wells Fargo's team of economists wrote on Friday.

"The ongoing improvement in supply chains has helped to ease pressure on goods, and we expect vehicle prices to contract in June. At the same time, core services are likely to stay firm. Shelter inflation is only slowly cooling off, while medical care and recreational services have scope to rebound in June. The Fed will welcome the continued moderation in price growth, though the road back to 2% inflation remains long."

On the corporate side, earnings from Delta Air Lines (DAL) and PepsiCo (PEP) are expected on Thursday, followed by a slew of earnings from the financial sector on Friday morning with JPMorgan, Wells Fargo, Citi, and BlackRock all set to report.

Investors will be keenly focused on how banks continue to grapple with the fallout from this spring's bank failures and the subsequent deposit drains across the system. As ever, JPMorgan Chase CEO Jamie Dimon's comments on the state of the US economy and banking sector will be closely monitored.

"JPM could surprise to the upside in terms of the revenue synergies from the [First Republic] deal," Goldman Sachs managing director Richard Ramsden wrote in a note on July 5. "WFC should benefit from less capital markets exposure, given expected weakness in these businesses in the quarter, as well as potentially better, idiosyncratic margin trends."

Entering second quarter earnings season, investors will be watching to see if S&P 500 companies register an earnings decline for the third straight quarter.

Strong economic data reported over the past two weeks has indicated the consumer remains resilient, but what companies signal about a potential slowdown in the second half will be in focus.

Data from FactSet published Friday showed S&P 500 companies are expected to report a 7.2% drop in earnings from the same period last year, which would mark the largest annual drop since the second quarter of 2020.

However, we'd note that Energy is expected to see earnings drop 48.3% from a year ago, while sectors like Consumer Discretionary and Communication Services — which have been key to this year's rally — are forecast to see earnings rise 26% and 12% in the second quarter, respectively."

MY COMMENT

Seems like EARNINGS just ended. It will take a while to get into the guts of the earnings.

I notice this time around the most of the "experts" are keeping their mouths shut. Good idea.....since they were so humiliated last time around.

 

HERE are the EARNINGS REPORTS that I have on my calendar. NOTE......these dates are not set in stone.

TSLA 7-19-23
GOOGL 7-25-23
MSFT 7-25-23
AAPL 7-27-23
AMZN 7-27-23
HON 7-27-23
HD 8-15-23
NVDA 8-23-23
COST 9-28-23
NKE 10-5-23

I generally expect earnings to be GOOD. I hope to see progress with supply chain and the pandemic recovery reflected in this next batch of earnings.

 

Looks like a typical open today. Wishy-washy and vague. The SP500 and NASDAQ are just FLOATING with the currents of the day. The DOW is up well.....but.....I dont believe there is much behind the move that is significant.

Welcome to Monday.....welcome to summer.....welcome to the short term.

 

I like this little article.

Remember Don’t Fight the Fed?

https://awealthofcommonsense.com/2023/07/remember-dont-fight-the-fed/

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

"There are two rules when it comes to stock market aphorisms:

(1) They have to be easy to remember.

or

(2) They have to rhyme.

Some classic examples:

Be greedy when others are fearful and fearful when others are greedy.

Buy when there’s blood in the streets.

The trend is your friend.

Don’t try to catch a falling knife.

Let your winners ride and cut your losers short.

Buy low, sell high.

Buy the rumor, sell the news.

Buy what you know.

Buy the dip.

Sell in May and go away.

Don’t put all your eggs in one basket.

Concentrate to get rich. Diversify to stay rich.

Skate to where the puck is going.

I’m sure I missed a few but this plays most of the hits.

One thing you should notice right away is many of these rules of sayings are in conflict with one another. I guess that’s what makes a market.

But it’s also important to understand that nothing works all the time. That includes rules of thumb, pithy one-liners and rhymes that make you feel all warm and fuzzy.

Here’s another one for the list that seems to be in a state of flux this year:

Don’t fight the Fed.

There was this idea in the 2010s that stocks were only going up because of the Fed. There was the Fed put. And the Fed was printing money. And the Fed was providing liquidity. And the Fed was blowing bubbles yet again.

If it wasn’t for the Fed the stock market would crash just like 1929!

Listen, I’m not here to tell you the Fed had nothing to do with the bull market of the 2010s. The Fed certainly made things easier on risk assets by taking interest rates to 0%.

But rates were even lower in Japan and Europe and they didn’t get a raging bull market during the previous decade.

Plus, we have the John Bogle return formula that shows how fundamentals helped power the stock market in the last decade as well:


Low rates helped but so did the fundamental driver of long-run stock market returns — earnings growth.

Last year don’t fight the Fed made a lot of sense. They raised rates at a feverish pace and we had a bear market.

But a funny thing happened this year — the stock market started fighting back.

And not just any stocks. The biggest winners this year are tech stocks, the very companies most people assumed would have the biggest problem with higher rates.

The Nasdaq 100 is up almost 40% this year. The biggest tech stock in all the land — Apple — is up nearly 50% in 2023.

This is despite the fact that the Fed has continued raising rates, will likely raise them even more at the next meeting or two and they have shrunk the size of their balance sheet.

Most things in the markets (and life) exist in a state of gray, not black or white.

Rules of thumb can be helpful in certain areas of life.

But most of the time the stock market doesn’t conform to a phrase that sounds nice or seems like it should make sense.

The stock market doesn’t always need to make sense.

Sometimes that means the Federal Reserve doesn’t matter as much as you think when it comes to stock price movements."

MY COMMENT

LOTS of good info in this little article.

First......fundamentals matter and drive the markets MORE than the FED and other irrelevant "stuff".

Second.......the various little market sayings.....I actually believe in most of them and dont see them as generally contradictory. they actually represent many of the behaviors that make for successful long term investing.

Third......the FED is NOT that relevant. They do not control the economy. They are usually wrong as often as they are right. AND......they are way overrated.

Forth.....the markets dont need to make sense or have some explanation. Often when it comes to the long term......you just have to believe.

Fifth.......the big tech companies are NOT really interest rate sensitive as is often claimed in the daily media.

AND....yes the "sell in May" quote above is intentionally NOT in BOLD.

 

The market today......for short term people.

Stocks muted with inflation data in focus

https://finance.yahoo.com/news/stoc...-focus-stock-market-news-today-133529971.html

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

"Stocks opened slightly lower Monday, kicking off a week where the focus will be on inflation, interest rates, and the start of the second-quarter earnings season.

The S&P 500 (^GSPC), the Dow Jones Industrial Average (^DJI) and the tech-heavy Nasdaq Composite (^IXIC) slipped below the flatline.

Wall Street is looking ahead to US consumer and producer inflation reports due later this week, expected to show that price pressures are easing. That could nudge the Federal Reserve into easing up on rate rises later this year, though it's still seen as likely to hike in July even after some cooling in the June jobs report.

Meanwhile, in China, fresh price data raised the specter of deflation in the world's second-biggest economy, as Beijing's stimulus moves seem to be falling short.

Further out, investors are getting set for big-name financial results, with Q2 reports from big banks such as JPMorgan and Citi on Friday's docket.

• Stocks edge up after China data as Wall Street eyes inflation reports
  Stocks edged up on Monday as China’s deflation risks sparked concern over the global economic outlook ahead of key US inflation reports out this week.
  
  The S&P 500 (^GSPC) added 0.14%, while the Dow Jones Industrial Average (^DJI) gained 0.27%. The tech-heavy Nasdaq Composite (^IXIC) was flat at 9:38am ET."

MY COMMENT

YEP.......not much going on this week. We will start earnings but the primary focus will be on the BANKS. Unless you own a bank stock the bank earnings are not particularly relevant to how other types of business might do when they report.

We will be moving quickly into the guts of earnings in about 3-4 weeks when the big tech and other companies report.

 

It is all about expectations.

Did Nvidia ruin earnings season for stock market bulls?

https://finance.yahoo.com/news/did-...ock-market-bulls-morning-brief-130007544.html

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

"Pushing aside the letdown June jobs report and your general obsession (or is that just me) with everything coming out of the Federal Reserve, I want to remind you of three things to start the week.

First, there is more to investing than stalking Federal Reserve headlines. Two, this week earnings season begins and the stories companies tell investors will become more important than the Federal Reserve (at least until the July 26 FOMC meeting...). And three, as the earnings machine kicks into warp overdrive — remember that not every company in the stock market is a profit beast with a five-year runway to show explosive growth like chip king Nvidia.

And because of that brutal reality, the market could be set up for disappointment as crops of ho-hum earnings reports trickle in.

"The bar has been set high for 2Q23 reporting season as blockbuster 5/24 results from Nvidia have catalyzed upward earnings revisions for the growth heavy Nasdaq," opined EvercoreISI's always prescient strategist Julian Emanuel in a weekend client note.

To jog your memory, May 24 brought a shocker from Nvidia that opened a lot of eyes across Wall Street.

Nvidia said it expects second-quarter revenue to come in at about $11 billion, plus or minus 2%. Wall Street was anticipating $7.2 billion. I have been crunching numbers on stocks for 20 years — I have never seen this magnitude of sales upside from a company. Ever. Not even close.

The Street is now projecting $11.02 billion in sales for Nvidia's second quarter, according to Yahoo Finance data. Analysts expect Nvidia to add another $1 billion in sales from the second quarter's end to the third quarter's conclusion (October).

Nvidia founder and CEO Jensen Huang told analysts at the time the very upbeat outlook reflected a fundamental shift to accelerated computing. In turn, that is placing Nvidia's chips that power generative AI in incredibly high demand.

"We're seeing incredible orders to retool the world's data centers. And so I think you're seeing the beginning of, call it, a 10-year transition to basically recycle or reclaim the world's data centers and build it out as accelerated computing," Huang said. "You'll have a pretty dramatic shift in the spend of a data center from traditional computing and to accelerate computing with SmartNICs, smart switches, of course GPUs and the workload is going to be predominantly generative AI."

The problem here is that UnitedHealth isn't selling AI chips. It sells healthcare. Warren Buffett's Berkshire Hathaway isn't selling AI chips. It sells railroad services via Burlington Northern (among other things). Home Depot for darn sure isn't selling AI chips. I just went to an HD store on Sunday to buy a BBQ brush — no AI chips down aisle 10 I assure you.

Yet, the S&P 500 has rallied an impressive 6.5% since that Nvidia sales guidance shocker. The advance has bought the US equity market to a 19.3 times forward P/E multiple, a 19% premium to the 15-year average, points out strategists at UBS.

It's as if investors are positioned for more Nvidia type stories (a growth boom) instead of hearing ones where companies are being challenged by stubborn inflation, higher financing costs and slowing sales growth.

The mismatch in expectations — in part fueled by the juggernaut that is Nvidia — could trigger swift earnings related sell-offs as reality comes home to roost warns Emanuel.

"Double misses" (EPS and sales) are likely to be as punished or more vs. 1Q’s announcement reaction of -5.3%, while double beats could see anemic action," Emanuel says.

He adds, "Nvidia changed the way investors will perceive this upcoming earnings season."

Good if you own Nvidia, but probably bad if you don't."

MY COMMENT

I do think there is some truth here. NVDA has set the bar so high that many companies that report completely adequate earnings may be punished anyway.

This has been the trend for some years now anyway. Good earnings are often punished based on some obscure data point or forward looking statement that the media decides to run with.

Earnings are an EXPECTATIONS game more than anything else. Good management knows how to play this game.

I notice that there are not many people out on a limb this earnings season. People are siting and waiting for the actual results. JUST.....dont throw the baby away with the bath water. Excitement and positivity are good.....but......have the awareness that "adequate" earnings that compound and grow over the years are often just as good as BLOCKBUSTER reports.

 

Something to keep in mind if you own the NASDAQ 100.....or any market cap weighted Index that re-balances.

Nasdaq 100 Plans Special Rebalance To Curb Dominance Of 'Magnificent Seven'

https://www.investors.com/news/nasd...rb-dominance-of-magnificent-seven/?src=A00220

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

"The Nasdaq 100 index is set to adjust the weighting of its 100 components, with the "magnificent seven" stocks Microsoft (MSFT), Apple, Nvidia (NVDA), Tesla (TSLA), Google parent Alphabet (GOOGL), Meta Platforms (META) and Amazon.com (AMZN) currently accounting for more than half the index's weight.

The Nasdaq 100 special rebalance will take place before the market open on Monday, July 24, to "address overconcentration in the index by redistributing the weights."

The weighting changes will be announced on Friday, July 14. No stocks will be added or removed.

The Nasdaq 100 includes the 100 largest non-financial Nasdaq components.

How Is the Nasdaq 100 Weighted?

The Nasdaq 100 index is a modified market-capitalization index. Market valuation is the largest factor, but with methodology to limit overconcentration.


Nasdaq 100 Weights Of Magnificent Seven

Company Ticker......Weight Market cap.......in trillions

Microsoft MSFT 12.9% $2.51
Apple AAPL 12.5% $2.99
Nvidia NVDA 7.0% $1.05
Amazon AMZN 6.9% $1.33
Tesla TSLA 4.5% $0.87
Meta Platforms META 4.3% $0.75
Alphabet GOOGL 3.7% $1.52
Alphabet GOOG 3.7%

The seven-largest companies in the Nasdaq 100 account for 55% of the index. It seems likely that this combined weighting will be reduced. It's also likely that there may be notable weighting shifts within these seven giants.

The current weights show that market capitalization is the dominant factor, but it's not the only one.

Microsoft stock has the largest weight, at 12.9%, as of July 7. Apple stock has a 12.9% weight, despite having a $2.999 trillion market cap vs. Microsoft's $2.51 trillion.

Google stock has a 7.4% weighting with the GOOGL and GOOG share classes combined.

Nvidia stock has vaulted to a 7% Nasdaq 100 weighting, thanks to its $1.05 trillion market cap. That's a slightly larger weight than Amazon stock (6.9%), even though the latter has a significantly higher valuation at $1.33 trillion.

Tesla stock and Meta Platforms round out the top-seven members, with weights of 4.5% and 4.3%, respectively.

Just for reference, for the entire Nasdaq composite, Apple stock has an 11.4% weighting while Microsoft is at 9.5%. GOOGL stock is at 5.8% while Amazon and Nvidia are at 5.1% and 4%, respectively. TSLA stock has 3.3% share and META stock is at 2.8%.

Magnificent Seven Soar In 2023

The Invesco QQQ ETF (QQQ), which tracks the big-cap Nasdaq index, is up 37.5% in 2023 through July 7. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), which gives an equal weight to all 100 stocks, is up just 18.8%.

This largely reflects massive moves by megacaps this year. NVDA stock has nearly tripled (191%). META stock has soared 141% while TSLA stock is up 123%. AMZN stock has leapt 54.5%. AAPL stock has run up 47% and MSFT stock nearly 41%. Google stock is up a still-robust 35%.

There is some concern that this handful of names is distorting the health of the overall stock market, which is likely what's spurring the special rebalancing.

Will Nasdaq 100 Special Rebalance Affect Stock Prices?

The Nasdaq 100 special rebalance will spur stock allocation shifts among ETFs such as QQQ and mutual funds that track the index. So there could be some one-off gains or losses, perhaps as the planned changes are announced on July 14.

However, the impacts may be modest. For one, the big-cap Nasdaq index is going to adjust weightings, vs. a full addition or deletion. Also, far more money tracks the S&P 500, which is why S&P 500 component changes get a lot more attention than Nasdaq 100 moves.

The S&P 500 index, unlike the Nasdaq 100, is a pure market-cap weighted index."

MY COMMENT

The bottom line is if you invest in an INDEX it is nice to know how the index works. I tend to NOT like indexes that re-balance. It makes it impossible to test or evaluate performance over a time span if the Index is changing from time to time. All Indexes make some changes.....for example....additions or elimination of companies. I think this sort of market cap weighting change has more impact than other sorts of changes when it comes to evaluating the Index performance over the longer term.

THUS......I prefer the SP500 as my index of choice to use as a market measure.

 

I dont like this little bump in the road between India and American tech companies. We OBVIOUSLY need to get out of China.

Apple supplier Foxconn pulls out of $19.5 billion India chip project

https://www.cnbc.com/2023/07/10/app...t-of-19point5-billion-india-chip-project.html

"Key Points

• Foxconn is pulling out of a $20 billion joint venture in India that would have produced semiconductor and display components.
• The top Apple supplier didn’t provide a reason for the breakup, but the $19.5 billion project would have been one of its largest moves outside China.
• Apple has emphasized supply chain de-risking to suppliers, even as executives walk a fine line in public commentary on the Communist regime."

MY COMMENT

SEE article for more detail.....although these is not any explanation for why this is happening.

 

Looks like the NASDAQ has made a come-back.....but it is still slightly negative for the day right now. At the same time the DOW is still positive but has backed off the earlier in the day move up.

In other words.....we are very early in the day and the week......and how we end up......is totally up in the air, as usual.

At least the Ten Year Treasury yield has dropped some. It is still.....however.....over 4%.

 

I.....SIT.....WAIT......and.....WATCH. The exciting life of a long term investor.

At least we are now six months past LAST YEAR. Year 2022 was a brutal...... CRAP year.....for investors. I hated that year. It was all pain and no gain. I watched my portfolio hit the same LOW four time over the course of the year.

YET......I sat through it and held on. That is all an investor can do. SUCK IT UP and take the pain.

This year has been a refreshing change. BUT....I still will not get carried away. My goal remains the same as any other year:

1. Maintain a long term average gain of 10% or more.

2. Beat the SP500 for this particular year

It is nice to be up by over +32% for the year so far. BUT.....there is a long way to go till year end when 2023 results are locked in. No doubt we will see times of market weakness.....perhaps even a correction. Over the long term all of this stuff evens out.......IF.....what you are invested in is RATIONAL and REASONABLE. That is the BIG "IF".....for most investors.

If I was not able to meet or beat the SP500 long term.....I would be looking at my stock picking criteria and skills. i would also be looking at my investor behavior and especially my COMMON SENSE.

 

I think that article is focusing on the FACT that many investors react according to EMOTION. AND......they chase returns. They allow their expectations to get distorted.

Of course media cheer leading plays a part.

BUT.....SMOKIE (above) is an example of the right approach......and how any long or short term investor "should" think. That little article is talking indirectly about investor GREED and ENVY......among other things......which can sneak into our thinking and subtly impact expectations.

 

Good to see the NEGATIVITY is still out there.

The earnings recession is here, and it's about to get even worse

https://finance.yahoo.com/news/the-...nd-its-about-to-get-even-worse-174057805.html

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

"Second-quarter earnings season begins in earnest this week, and the forecast is rather bleak.

Expectations are for earnings to decline for a third-straight quarter. Consensus estimates project a decline of about 7% in earnings per share among S&P 500 companies compared to the same quarter last year, which would mark the steepest decline since 2020, per UBS.

Across the sectors, consumer discretionary and communications services are the only two of the 11 sectors expected to see second-quarter earnings growth materially higher.

Meanwhile, S&P 500 companies are also expected to see no year-over-year revenue growth for the first time in 10 quarters, per Goldman Sachs.

"US economic growth has remained strong since the start of 2Q and explains most of the sales growth in our top-down model," David Kostin, Goldman Sachs chief equity strategist wrote in a note on July 7. "However, weaker commodity prices and falling inflation, which may limit firms’ pricing power, are incremental headwinds to S&P 500 sales growth."

Thematically, AI buzz will likely get more scrutiny from investors.After AI led gains last earnings season, Goldman Sachs argues this quarter will be more about if those AI promises are starting to turnintomeaningful profits —and when that can be expected. The health of the consumer and the state of the financial system after the spring's banking crisis will also be key themes to watch.

A 'low bar'

Overall, an earnings decline can still drive upside for stocks if estimates are low enough to begin with. Analysts differ on whether that's the case

Goldman Sachs and UBS both highlight a "low bar" for earnings in the second quarter.

Goldman Sachs believes companies will be able to meet it while UBS sees a less than 1% earnings-per-share miss below that bar.

For its part Evercore ISI notes some stocks have a lower bar to leap for a beat, but for tech stocksat large, Nvidia's AI surge followinglast quarter's report sets the bar high.

"Blockbuster 5/24 results from Nvidia have catalyzed upward earnings revisions for the growth heavy Nasdaq," EvercoreISI strategist Julian Emanuel in a weekend client note.

Emanuel also highlights that last quarter company stocks saw less positive reaction to earnings beats in the 24 hours after reporting while companies that missed estimates saw outsized stock reaction to the downside.

There is still a silver lining expected to come in second earnings season. Both Goldman Sachs and UBS use the term "bottom" in their Q2 earnings previews, highlighting the second quarter of 2023 might likely be the worst for year-over-year earnings comparisons.

"Unlike the past 5 quarters, forward earnings revisions appear to have bottomed," Kostin wrote.

Kostin points out in the long run, S&P 500 returns often follow the forward-looking expectations for earnings.


Prices in the S&P 500 often follow earnings per share revisions, per Goldman Sachs."

MY COMMENT

You see above that the "experts" have now changed how they predict and evaluate earnings. NOW....they are placing ALL their emphasis on whether there is an....."earnings decline" from past quarters. Up till now the gold-standard for earnings was whether or not they beat the "expert" expectations and predictions.

In other words they have RIGGED THE GAME....by changing their criteria for "bad earnings" to a data point they are confident they can hit.

In addition they are STILL using the....."low bar"....BS as an excuse even before earnings come out. WELL......if the bar is too low.....why did they make their predictions so far under reality? I mean......come on man.....these estimates are supposed to be reality.......NOT......"low bar" reality. How is it helping their clients to be putting "LOW BAR REALITY" out there for their investors to rely on?

I really dont care about this game playing. The more negative the better. It indicates a long way to go for the current BULL MARKET. Come to think of it......they ALL missed out on calling the current BULL MARKET.....also.

At some point in the future if I find all the "experts" agreeing with me.....I will probably FREAK OUT.