The Long Term Investor

LOL. I said I would evaluate them.....not necessarily buy them. I looked at them once in the past and did not pull the trigger.

YES.....poor Amazon.

 

The OBVIOUS news of the day.

Inflation: Consumer prices in June rose at slowest annual rate since March 2021

https://finance.yahoo.com/news/june-cpi-inflation-data-july-13-2023-123148137.html

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

"Consumer prices rose at the slowest pace since March 2021 as inflation showed further signs of cooling in June, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.

The Consumer Price Index (CPI) rose 0.2% over last month and 3% over the prior year in June, a slight acceleration from May's 0.1% month-over-month increase but a slowdown compared to the month's 4% annual gain.

Both measures were slightly better than economist forecasts of a 0.3% month-over-month increase and a 3.1% annual increase, according to data from Bloomberg.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in June climbed 0.2% over the prior month and 4.8% over last year. Both measures were also slightly better than economist expectations.

The monthly core increase was the smallest 1-month increase in that index since August 2021.

Core inflation remained especially sticky last month as rent prices continue to surge. The index for rent and owners' equivalent rent rose 0.5% and 0.4%, respectively, on a seasonally adjusted basis. Owners' equivalent rent is the hypothetical rent a homeowner would pay.

The shelter index, which jumped 7.8% annually and 0.4% between May and June on a seasonally adjusted basis, was the largest factor in the monthly increase of core inflation, accounting for over 70% of the increase.

Among the other indexes that rose in June was the index for motor vehicle insurance, which increased 1.7%, and the index for apparel which increased 0.3%. The indexes for recreation and personal care also increased last month, the BLS noted.

Still, other indexes did see prices soften such as airline fares, which fell 8.1%, along with the prices for used cars, which had been expected.

The energy index decreased 16.7% for the 12 months ending in June although prices increased 0.6% on a seasonally adjusted, month-over-month basis after falling 3.6% in May's report.

The food index increased 5.7% over the last year with food prices rising 0.1% from May to June. Egg prices fell another 7.9% last month after dropping 13.8% in May and 1.5% in April.

US stocks moved higher in early trading following the release of the data. Treasury yields fell about 8 basis points to around 3.9% as economists championed the report.

"Headline inflation is plunging for consumers," Chris Rupkey, FWDBONDS Cchief economist, wrote in reaction to the data. "CPI inflation peaked at 9.1% year-on-year last June 2022 and today it is at a new low for the year at 3% year-on-year. The economy is on a safer path today as victory over inflation is in the air. Even core inflation is down in the dumps with a 0.2% rise which is the softest print since August 2021."

Eugenio Aleman, chief economist at Raymond James, added: "June’s CPI report was better than what markets were expecting. ...However, as the report indicates, shelter costs remained strong during the month and represented more than 70% of the increase in the monthly index."

"This means that if, as we expect, shelter costs start to weaken considerably during the second half of the year, the prospects for much lower inflation readings are looking promising. If we don’t have much lower readings for shelter cost and also base effects, we may see higher year-over-year inflation until the end of this year," the economist continued.

Although the 3% jump in headline inflation represents a continued slowdown, it's still significantly above the Federal Reserve's 2% target.

That, along with last week's jobs report data that showed a resilient labor market with unemployment low and wages high, suggests the Federal Reserve will continue to raise interest rates this year.

Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly both signaled on Monday more rate hikes were needed to tame inflation.

Investors will be closely monitoring comments from central bank officials including Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin, and Cleveland Fed President Loretta Mester, who are all expected to speak on US economic policy throughout Wednesday.

The central bank paused its aggressive rate hiking cycle in June but implied it will likely raise rates by 0.25% two more times this year (or raise rates by 0.50% in one shot).

"Rapid disinflation in June illustrates the difficult position the Fed finds itself in," EY economist Greg Daco wrote in a note to clients following the report. "After foregoing a rate hike last month, Fed Chair Powell and most policymakers have made clear they will raise the federal funds rate at the upcoming July FOMC meeting. Yet, inflation dynamics would argue that a rate hike in June would have been more sensible if policymakers truly thought a more restrictive policy stance was required to tame inflation."

Ryan Sweet, chief US economist at Oxford Economics, added, "The Fed has painted itself into a corner as Fed officials' communication has signaled that another rate hike this month is essentially a slam dunk. However, the new data could give the Fed reason to debate whether any further rate hikes after this month are needed."

Immediately following the release of the data, markets were pricing in a roughly 90% chance the Federal Reserve raises rates by another 0.25% at its July 26 policy meeting, according to data from the CME Group."

MY COMMENT

Very good news for investors. Inflation below expectations......and at the same time.....no indication of a recession. The sweet spot. As to what the FED does......who cares.

One or even two more rate hikes by the FED are not going to be a problem. Now if they do more than that......we are going to risk killing the economy and/or placing the economy into DEFLATION.

This stuff is very much a lagging indicator. We need to sit and wait for at least 4-6 MONTHS to see how this all impacts the economy.

 

YES......there is no recession.

There’s no such thing as “rolling recessions”

https://www.themoneyillusion.com/theres-no-such-thing-as-rolling-recessions/

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

"You predicted a recession and it didn’t happen? You are about to be interviewed by CNBC? Have no fear, you can always claim that there has been a “rolling recession”. It’s like a get out of jail free card.

Rolling recessions do not exist. The fact that weakness in housing was followed by weakness in manufacturing and then a few layoffs in tech doesn’t mean a thing if the overall economy continues booming. Claims of rolling recessions are used merely as an excuse for failed macroeconomic predictions that flowed from bad models. Here are a couple reasons why they don’t exist:

1. It’s true that recessions often involve fairly modest reductions in GDP, say 2% or 3%. But that does not imply that a similar decline in a single sector is equally significant. Individual sectors are far more volatile that overall GDP, which aggregates all sectors of the economy.

Consider the following analogy. You meet two children, one of which is 3 inches taller than the other. Is that a significant difference? Does that sort of difference prove that one must be considerably older than the other? Not really, height varies a great deal from one person to the next. In contrast, if told that a class of 30 students had an average height that was 3 inches higher than another class of 30 students in the same school, you can be pretty confident that the taller class is in a higher grade. The law of large numbers is quite powerful.

Thus while a 2% or 3% fall in GDP is quite important, a 2% or 3% fall in housing or manufacturing is hardly worth commenting on. Those sectors are far more volatile than GDP. There is no sign of a significant fall in either construction employment or manufacturing employment.

2. Recessions are an aggregate phenomenon, and hence are quite distinct from economic shocks that only impact a single sector. Recessions are distinctive because they are the product of shocks that have broad effects across the entire economy. Even in an economy that is doing fine, some sectors will grow while others contract. To call this natural churn a “rolling recession” is to drain all meaning from the term “recession”.

It’s like when people talk about “eggflation”. Rising egg prices are certainly an interesting phenomenon, but they have nothing to do with the sort of inflation associated with a general depreciation in the purchasing power of money. (Except that portion of rising egg prices that reflect a rise in the overall CPI.)

Stop talking about “rolling recessions” and just admit that your 2022 recession call was wrong!

And please, when we finally do get a recession, don’t claim, “See, I called it.”

PS. According to Bloomberg, tech’s rolling recession is now over:

PPS. Paul Krugman has a column that discusses the way that tech entrepreneurs like Elon Musk confuse their own sector with the aggregate economy. Here are a few typical Musk tweets:


We may well have a recession. But no, a recession was not “already here” in April.

PPPS. And someone should tell Musk that when he’s wrong the gracious thing to do is admit the mistake, not attack the messenger:"

MY COMMENT

The recession call was simply WRONG. LET IT GO. Make a new call.....the old one.....it is over with. MOVE ON.

 

Markets are on a roll early today. It is all compliments of the CPI data. BUT......like sports.....an early lead is not the game....we still have to play the game for the whole day today. I expect we will see nice gains today.....but an expectation is not reality. We will know reality at the close today.

Stocks pop as inflation continues cooldown

https://finance.yahoo.com/news/stoc...oldown-stock-market-news-today-124307885.html

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

"Stocks opened higher Wednesday as inflation continued its cooldown in the US, weakening the case for more interest-rate rises from the Federal Reserve.

The S&P 500 (^GSPC) was up almost 1%, while the Dow Jones Industrial Average (^DJI) added about 0.6%. The tech-heavy Nasdaq (^IXIC) traded a tad above 1%. All three major benchmarks closed with gains on Tuesday.

The Consumer Price Index (CPI) report slowed to its lowest rate since March 2021, which is bolstering hopes that Fed officials might rethink their stance that more rate hikes are needed to ease price pressures.

But the rate is still above the central bank's 2% target, and traders are pricing in a 91% chance of a rate hike at the Fed's July meeting, according to the CME FedWatch Tool.

MY COMMENT

For the very short term.......just one day.....the above is all you need to know.

As a long term investor you dont even have to know the above. You could be living in a cave.....totally out of touch......and still enjoy the gains. That is the POWER of long term investing. You dont have to do or even know anything. You simply have to be exposed to the markets in a rational and realistic way for the long term.

Of course......just calling yourself a long term investor does not cut it. Saying you are a long term investor and trading, churning your portfolio, market timing based on news and economic data, etc, etc, etc......is still going to FAIL. You have to walk the walk. It is NOT all about talk. I see this sort of behavior all the time. People talk about being a long term investor but when you look at their portfolio and actions they are NOTHING like a long term investor.

 

LOL.......I wonder about all these "experts". They ALL work for someone that is paying them to make these predictions. You would think their employer or their employers CLIENTS would wonder why they are being fed wrong information all the time.

 

ACTUALLY.....what I really remember is the time when CPI and all these other reports were NOT obsessed over by investors. In the old days investors were focused on specific businesses that they owned......NOT....general economic data. Investors were more like business owners....focused on fundamentals.

Over the decades as investing and stocks and funds....became more common with the masses......and....media got involved....we have seen this sort of economic data start to dominate the investing conversation.

My memory is that this obsessive focus on economic data has not been the norm until about the past 20 years. I attribute much of this change to the financial media having to have something to talk about 24/7.

 

Being HUMAN.....I had to look at my account early today. Like everyone.....a very nice gain. ALL ten stocks nicely UP so far.

Now the questions is:



Do we build from here for the rest of the day......or.....do we fade?

 

To continue with a dead topic.......but.....it is a pet peeve of mine.

JPMorgan CEO Jamie Dimon chides managers who work from home: ‘I don’t know how you can be a leader and not be completely accessible to your people’

https://finance.yahoo.com/news/jpmorgan-ceo-jamie-dimon-chides-184750015.html

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

"JPMorgan CEO Jamie Dimon is no fan of remote work. He’s previously claimed it suppresses “spontaneous idea generation.” Now he’s talking again about his distaste for working from home—and taking aim at remote managers in particular.

“I don't know how you can be a leader and not be completely accessible to your people. I do not believe you can be a leader and not be accessible to your people,” Dimon told The Economist editor-in-chief Zanny Minton Beddoes during a wide-ranging interview on Tuesday, in which he also discussed the economy, U.S.-China relations, and his own legacy at the financial services firm.

Dimon did note that certain roles are suited for remote work, and that JPMorgan has always had a small percentage of employees work from home. But calling himself a work-from-home “skeptic,” he emphasized that he doesn’t believe remote work is good for creativity, younger employees doing apprenticeships, or for management teams.

“To the extent it works, I'm okay with it. If it doesn't work, I don't mind getting rid of it either,” he said. “We're not going to make that decision because we're pandering to employees. That is not the way to build a great company.”

JPMorgan started calling its traders back to the office as early as September 2020—though soon after some workers were sent home after an employee tested positive for COVID. Attempts to return to in-person work over the past few years have been met with employee pushback. In April 2023, the bank ordered its senior leaders back to the office five days a week, with the threat of “corrective action” if they refused.

The chiefs of other banks have also had some harsh words about remote work. Morgan Stanley CEO James Gorman previously said that remote work is “not an employee choice.” And Goldman Sachs CEO David Solomon called it an “aberration.” Dimon himself said he was “about to cancel all my Zoom meetings,” in 2021, adding “I’m done with it.”

All of JPMorgan’s managing directors are now fully in-office, and 60% of employees work in-person full-time, Dimon told Minton Beddoes. Around 10% of employees—primarily those in certain sales or service roles—work entirely from home, and the remaining 30% commute to the office three days per week, he added.

In his interview with Minton Beddoes, Dimon acknowledged that his preference for in-person work isn’t for everyone—but said those who disagree can look for work elsewhere.

“I completely understand why someone doesn't want to commute an hour and a half every day. Totally get it,” he said. “Doesn't mean they have to have a job here either.”"

MY COMMENT

As a business owner and very good manager......I agree completely. I dont believe that ANY manager can have a complete understanding of their business and employees if they are not working together.....at least part of the week.

My view is that we have seen the collapse that occurred in education with remote learning. I believe the results in business are the same....but....we dont do testing in business like we do in education so we have no clear cut common way way to measure the results of "work from home".

BUT.......yes....I realize that most people dont care about this. I just can not disconnect myself from my habits and what I learned building and running a business.

 

The post above from SMOKIE....is the basis of all successful investing. Well said.

To me the critical element is SIMPLICITY. The most simple path produces the best result....all things being equal. BUT....the human brain CRAVES COMPLEXITY. We equate complexity with.....doing something. Most of the time it is simply.....BUSY WORK.....that makes us FEEL LIKE we are doing something.

Like the obsessive focus on economic data. I can honestly say.....I give economic data......ZERO WEIGHT.....when it comes to investing. Although I post about it often on here in terms of the day to day happenings in the markets.

 

To me the greatest question in investing and business is......WHY? I found in business that asking.......WHY?.....would get me to the.......simple and real answer.......after about 5 times of asking that one word question. It tends to cur through the expectations, and BS....that people spout to their boss.

 

I am now seeing some slight moderation in the gains today. OHHHHHHH NOOOOOOOO.

 

The future......whether people want to admit it or not.

This CEO replaced 90% of support staff with an AI chatbot

https://www.cnn.com/2023/07/12/business/dukaan-ceo-layoffs-ai-chatbot/index.html

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

"London CNN —
The chief executiveof an Indian startup laid off 90% of his support staff after the firm built a chatbot powered by artificial intelligence that he says can handle customer queries much faster than his employees.

Summit Shah, the founder and CEO of Dukaan, a Bangalore-basede-commerce company, said on Twitter Monday that the chatbot — built by one of the firm’s data scientists in two days — could respond to initial customer queries instantly, whereas his staff’s first responses were sent after an average of 1 minute and 44 seconds.

The average time taken to resolve a customer’s issue also dropped by almost 98% when they interacted with the chatbot, he tweeted.

Shah said the job cuts were “tough” but “necessary.

Shah told CNN Wednesday that the 23 layoffs were made in September. At the time, he told Indian investment publication VCCircle that Dukaan’s shift away from smaller businesses to consumer-facing brands also contributed to the job cuts, because the switch to these customers had reduced the need for live chat or calls.

“Given the state of [the] economy, startups are prioritizing ‘profitability’ over striving to become ‘unicorns,’ and so are we,” Shah tweeted Monday, using the term for privately held startups valued at $1 billion or more.

By introducing the technology, the company has cut the cost of its customer support function by about 85%, Shah said. He added that this part of the business had long been problematic, with delayed responses and limited availability of staff at critical times, among other issues.

The tech founder said Dukaan was still hiring for multiple roles. According to the firm’s website, open positions include roles in engineering, marketing and sales.

Shah told CNN that he believed “in a future where AI and humans work together, each doing what they do best,” and that he was exploring opportunities to use AI in work involving graphic design, illustration and data science.

AI fears

The news of the layoffs comes as fears that AI will result in mass job losses have escalated eight months after Open AI released its AI-powered chatbot ChatGPT to the public.

ChatGPT has stunned users with its ability to provide lengthy, sophisticated responses to questions. Its potential uses — from writing high school essays to dispensing medical guidance — have heightened concerns that the technology could oust real people from their jobs.

Low- and middle-skilled jobs are most at risk from AI, including in construction, farming, fishing and forestry, the Organisation for Economic Cooperation and Development said Tuesday.

But the technology’s improving ability to complete certain non-routine tasks means professionals in finance, medicine and law may also suddenly find themselves at risk of automation from AI, the OECD added in a report"

MY COMMENT

We are just at the early beginning of seeing massive jobs cuts. Humans will not be able to compete with FREE labor. Like this company.....their cost savings....85%.

It is a pipe-dream to think that these cuts will be made up with other jobs. As AI escalates it will do ALL jobs that do not involve manual labor.

You cant blame a business. They have to compete and they are in the business of maximizing profits and productivity. People that dont want to work....well.....they will get their way.

How will they survive......no doubt some form of government minimum guarantied income......as well as street carts and other business like you see in the typical Science Fiction movie. YES.....it will be the ELITES and BUREAUCRATS working for government.......and everyone else. Until or unless there is an ANTI-TECH REVOLUTION. (I imagine this will be very difficult....if not impossible.... to pull off with robotics and AI)

Yet another reason......to build up as much FAMILY WEALTH as possible.

 

BACK to the present......the markets continue to BOOM today.

 

This is ALSO a big danger for those in retirement or approaching retirement.

Have Older Investors Become Too Aggressive?
What to make of their love affair with equities.

https://www.morningstar.com/stocks/have-older-investors-become-too-aggressive

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

"Bold Decisions

Last week, The Wall Street Journal’s Anne Tergesen filed a thought-provoking article titled “America’s Retirees Are Investing More Like 30-Year-Olds.” Although exaggerated, the headline is directionally correct. Today’s retirees have gotten adventurous, owning more stocks than ever before.

They are not doing so because of target-date funds. Although such funds are periodically accused (meaning, after each bear market) of investing incautiously as their target dates approach, most do not deviate greatly from the traditional approach of holding an equity position equal to 100 minus the investors’ age. Thus, the average stock weight for target-date 2025 funds is 44%—a modest 7 percentage points above what the cliché recommends.

However, reports Vanguard, when its 401(k) participants make their own choices rather than delegate the responsibility to professionals, they are much more aggressive. According to the 100 minus age formula, participants who are at least 55 years old should invest a maximum of 45% of their assets in stocks. In practice, though, two thirds of Vanguard’s older do-it-yourself 401(k) investors have most of their assets in stocks.

Here is another way of looking at the numbers. By any reckoning, a 70% equity position is aggressive for investors over the age of 55. Few institutional investment managers would make such a decision. No Vanguard 401(k) participant holding an appropriate target-date fund has such a steep stock allocation, and only 8% of those who are enrolled in managed accounts. But 32% of the company’s self-directed 401(k) investors who meet that description have done so.

Vanguard's Older 401(k) Participants
(Percentage With an Equity Allocation Exceeding 70%)

More Evidence

The pattern extends past both 401(k) accounts and early retirees. Among Vanguard’s taxable accounts, states Tergesen, 20% of the company’s customers who are aged at least 85 years have essentially everything in stocks. Fidelity’s clients, she reports, are similarly audacious.

These figures merit several caveats. Two thirds of Vanguard’s 401(k) participants own either target-date funds or a managed account and thus are more cautiously positioned. With the remaining customers, as well as with Fidelity’s data, we do not know about their additional assets. Perhaps they hold large amounts of cash and bonds in other accounts. Nor do we know whether Vanguard’s and Fidelity’s customers accurately represent the overall investor universe—although they probably do, given the size of those organizations.

However, as these conditions were all present at the start of the past decade, and the number of older investors with elevated equity allocations has risen by 25% since that time, the trend undeniably exists.

Why?

Tergesen suggests three reasons for the change in investor attitudes.

1) Personal Experience

Three years after Businessweek published its infamous “Death of Equities” cover, the Great Bull Market started, in 1982. With only brief interruption, it has not ceased. Consequently, few U.S. equity investors have faced a long-term decline. Commented Nobel Laureate Robert Shiller, “The spirit of the times is ‘Don’t worry about the markets crashing. They will come back up and set new highs.’”

2) Weak Competition

When the New Millennium dawned, on Jan. 1, 2000, 30-year Treasury bonds paid 6.63%. Had that yield persisted, permitting bondholders to reinvest their coupons at that same rate, patient investors would have converted a $10,000 initial purchase into more than $45,000 today.

Of course, that did not happen. Bond yields continued their long-term decline, and cash payouts fared worse. Stocks became the only legitimate game in town—and investors very much noticed.

3) Excess Assets

Consumer gloom notwithstanding, Americans on average are wealthier than they have ever been, especially within the investor class. Of course, those with substantial portfolios remain the exception rather than the rule, but the exceptions are growing. In 2020, for example, 9% of Americans between the ages of 70 and 74 were worth more than $2 million, not counting their home values.

Assuming moderate lifestyles, such retirees can amply afford stock market risk. For example, Tergesen spoke with a 72-year-old who owns a $3 million portfolio and who lives primarily on Social Security. He is 98% invested in equities.

Further Explanations

Those claims are surely correct. But I would cite two more factors.

1) Incomplete Rebalancing

Many investors, including yours truly, rebalance their portfolios irregularly. (”Irregularly” being my euphemism for “almost never.”) Some of the increase in equity allocation has therefore been caused by inertia. That holds particularly true for 401(k) accounts, which are predominantly owned by zombies. In 2002, reports Vanguard, only 6% of its do-it-yourself 401(k) participants made even a single trade. (The percentage was lower yet for target-date shareholders.)

2) Failing Hedges

Presumably, older investors would temper their stock market enthusiasm if acceptable alternatives existed. There are other ways to diversify portfolios besides bonds and cash. However, gold bullion has appreciated by a modest 25% over the past decade, oil prices are down, and as related in last week’s column, funds that purport to hedge stock market downturns have languished.

Where else is there to go but stocks?

Conclusion

My contrarian side regrets the stock market’s popularity. Better to invest in securities that are distrusted than those that are loved. (Even growth-stock investors share that belief, although they usually cannot find unloved companies that meet their standards.)

But I console myself with two considerations. For one, retail shareholders are but a single segment of the stock market. Not all investor groups have behaved similarly. For example, Fortune 1000 pension plans have slashed their exposure to U.S. stocks in recent years. For those worried that equities might be overbought, that is an encouraging offset.

The other counterargument is that, at least on the surface, U.S. equities do not appear to be egregiously priced. The following chart shows the price/earnings ratio for the Morningstar US Market Index since January 2000. The current figure is moderately above the 23-year norm, but not so high as to set off alarm bells."

MY COMMENT

To get market yields in stocks and funds you MUST be a long term investor. As BIG generations approach and go into retirement they have pretty much lost track of the fact that the historic return averages include time periods of below average returns for many, many years in a row.

I made the choice to divorce my retirement income from the markets with my Social Security and Income Annuities. As a result I have NO DANGER of being fully invested all the time for.....LIFE.

Very few people will make such a choice. AND.....very few people will appreciate how quickly your money can disappear in retirement with 2-5 DOWN YEARS in a row. They will find out the hard way.

MY VIEW......plan for the worst......when it comes to retirement. AND......when retired, CLINICALLY evaluate your assets........and plan for the worst.....EVERY YEAR.