The Long Term Investor

The week seems a lot worse than it is.

At this point the SP500 is just slightly negative for the past four days. I am amazed that we still have some hope for a weekly gain in the SP500 if we can put up a good solid day tomorrow.

I am happy to have......nearly.....survived yet another week of market madness. The madness of the short term....that is.

I dont buy into the "August bad month" stuff......but if we can wash all the weakness and fear out of the markets this month we might end up with a good potential for an old fashioned year end RALLY.

 

The broad markets open to the negative today. It will be tough for them to flip to the green over the course of the day....in my opinion.

BUT....the economic data that came out today is generally good........although it WILL be fear mongered as usual.....as bad.

Wholesale inflation in US edged up in July from low levels

https://finance.yahoo.com/news/wholesale-inflation-us-edged-july-123845604.html

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

"WASHINGTON (AP) — Wholesale prices in the United States picked up slightly in July yet still suggested that inflationary pressures have eased this year since reaching alarming heights in 2022.

The Labor Department reported Friday that its producer price index — which measures inflation before it hits consumers — rose 0.8% last month from July 2022. The latest figure followed a 0.2% year-over-year increase in June, which had been the smallest annual rise since August 2020.

On a month-to-month basis, producer prices rose 0.3% from June to July, up from no change from May to June. Last month's increase was the biggest since January. An increase in services prices, especially for management of investment portfolios, drove the month-to-month increase in wholesale inflation. Wholesale meat prices also rose sharply in July.

Analysts said the July rise in wholesale prices, from the previous month's low levels, still reflects an overall easing inflation trend.

The figures the Labor Department issued Friday reflect prices charged by manufacturers, farmers and wholesalers. The figures can provide an early sign of how fast consumer inflation will rise in the coming months. Since peaking at 11.7% in March 2022, wholesale inflation has steadily tumbled in the face of the Federal Reserve's 11 interest rate hikes.

Excluding volatile food and energy prices, "core'' wholesale inflation rose 2.4% from July 2022, the same year-over-year increase that was reported for June. Measured month to month, core producer prices increased 0.3% from June to July after falling 0.1% from May to June.

On Thursday, the government reported that consumer prices rose 3.3% in July from 12 months earlier, an uptick from June's 3% year-over-year increase. But in an encouraging sign, core consumer inflation rose just 0.2% from June, matching the smallest month-to-month increase in nearly two years.

By all measures, inflation has cooled over the past year, moving closer to the Fed’s 2% target level but still remaining persistently above it. The moderating pace of price increases, combined with a resilient job market, has raised hopes that the Fed may achieve a difficult “soft landing”: Raising rates enough to slow borrowing and tame inflation without causing a painful recession.

Many economists and market analysts think the Fed’s most recent rate hike in July could prove to be its last. Before the Fed next meets Sept. 19-20 to decide whether to continue raising rates, it will review several additional economic reports. They include another monthly report on consumer prices; the latest reading of the Fed’s favored inflation gauge; and the August jobs report.

Inflation began surging in 2021, propelled by an unexpectedly robust bounce-back from the 2020 pandemic recession. By June 2022, consumer prices had soared 9.1% from a year earlier, the biggest such jump in four decades. Much of the price acceleration resulted from clogged supply chains: Ports, factories and freight yards were overwhelmed by the explosive economic rebound.

The result was delays, parts shortages and higher prices. But supply-chain backlogs have eased in the past year, sharply reducing upward pressure on goods prices. Prices of long-lasting manufactured goods actually dipped in June."

MY COMMENT

The OBSESSION with microscopic moves in this sort of data is just ridiculous. But that is the world we live in.

That is the greatest benefit of long term investing......you make all this short term stuff IRRELEVANT.

 

I like this little article and where it leads.

Active Management Today is a Single Decision

https://www.capitalallocators.com/active-management-today-is-a-single-decision/

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

"About twenty years ago, I sat down with a leading long-short hedge fund in Korea. The portfolio manager spent forty minutes offering an articulate bull case for Samsung, in which he had a 20% long position. When he finished his impassioned presentation, I responded with a single question: “That sounds great, but why are you net short Samsung?”

The manager had a long book comprised of individual stocks and a short book comprised of KOSPI index options and futures. Samsung comprised 40% of the KOSPI index. His fund was 100% long and 60% short, so despite the seemingly large 20% long position, he effectively had a 24% short position through the index and was 4% net short his favorite stock. The concentration of the KOSPI index was wreaking havoc on his bottom-up stock approach to security selection and position sizing.

Since the GFC, the underperformance of active managers has been a repeated refrain. Index funds have been the beneficiaries, with Vanguard leading the pack and overseeing $7 trillion in assets. The flow of funds to indexes has also been the correct market call; the S&P 500 compounded at 12.2% for the last five years and 13.8% over the last fourteen, far surpassing most markets around the world and its long-term returns of 10.9% over the last fifty years[1].

The driver of this soaring index performance has been the magnificent seven.[2] These technology-enabled businesses emerged as the winners of the internet, capturing the lion’s share of all the economics created from the technological revolution. Their business success translated into stock performance as well. In an extreme example, in the first half of 2023, the mag seven comprised 95% of the performance of the S&P 500 and 70% of the MSCI ACWI.

After this incredible run, the mag seven comprises 25% of the S&P 500 and 18% of the MSCI ACWI. To put the dominance in perspective, the market cap of Apple today is larger than that of the entire Russell 2000 Index, and the mag seven weighting in the NASDAQ is so high (51%) that the index had to rebalance away from the stocks.[3] The S&P 500 and MSCI ACWI have experienced similar concentrations in the past but never has the concentration been in the hands of stocks with roughly the same risk factors – in this case large cap, high beta, growth, and technology.

As a result, active management today comes down to a single decision – how much do you own of the mag seven.

Many managers have a large position in one or more of the gang, but few have 25% of their portfolio invested. All the work of active managers that goes into creating an investment philosophy, searching for uncovered gems, conducting deep fundamental research, exercising sound decision making, and constructing rigorous portfolios is dwarfed at the end of the day by a single decision.

This setup has me thinking about first principles of an allocation to equities. Stated as a question, what are investors trying to capture by owning U.S. stocks? The purpose of the allocation is to benefit from diversified exposure to the U.S. or global economy, which raises another question: Is such a significant concentration in large, growth-oriented, technology companies achieving that objective?

Jack Bogle said the beauty of a cap-weighted index fund is it provides the purest representation of an economy as measured by the market. The mag seven certainly dominates the U.S. economy today, so he might conclude that it is what it is.

In recent weeks, I’ve had several conversations with CIOs who inquired how others are managing the underperformance of their U.S. equity managers. I don’t think diversified portfolios benefit much from having 25% of their U.S. equity exposure invested in a highly correlated basket of names. Most others agree. These CIOs are shrugging their shoulders and thinking about equal-weighted indexes, recognizing that their desired high active share is synonymous with a significant underweighting in the mag seven in a cap-weighted index. At the same time, that active share is resulting in significant underperformance.

Those seeking analogs to the dilemma can consort with their peers abroad. Raff Arndt from Australia Future Fund and Tom Joy from Church Commissioners Pension Fund in the U.K. both shared on the Capital Allocators podcast that the biggest driver of their returns each year is the decision of how much to hedge their home currency, as their global assets have lots of USD and EU exposure, but their liabilities are denominated in the AUD and GBP, respectively. They know they can’t get this right all the time but recognize that it still has the biggest impact on their results.

Active management in the U.S. today is the same.[4] The winners will make the right call on their allocation to the mag seven, and that’s about it. The entire investment process and the typical importance of behavioral, analytical, informational, or technical edge will be swamped by that one decision when assessing returns for the foreseeable future.

Few profess to have an edge on these types of decisions. Rather than diving in to develop a false sense of security, the lessons from peers abroad and stock pickers in emerging markets with concentrated indexes is one of communication. It’s less about what to do and more about how to educate your constituents on the choices at hand and expected outcomes to come.

Proper communication is necessary because the one decision will in fact determine relative performance in equities. It’s a very different dynamic than any I remember in this country, but it’s the same one that the manager in Korea faced twenty years ago.

One thing is for sure – communication and understanding is what gets us to the other side. The naivete that led that Korean manager to get net short his favorite name was not a good look irrespective of what happened with Samsung stock."

MY COMMENT

My ONE QUESTION to any active manager........show me your total return for the past 25 years......and.....are you beating the SP500. If not.....no thank you.

It is extremely difficult if not borderline impossible for any active manager to beat the SP500. That index represents the greatest 500 companies in the WORLD. I welcome the weighting......it keeps the focus of the index on the best of the best.....exactly where it should be.

 

Well the way I look at it is the climb of the past 13 months was for the most part unrecognized and unloved.

It has just been over the past few months that most people have recognized the bull market. This is not and was not a bull market based on exuberance. That is why we are seeing the current weakness....because support for a positive market is very tenuous.....short term.

BUT......bull markets dont care. They are based on fundamentals and earnings.....NOT.....news items or politics. Most of the current gains over the past 1-2 months were EARNINGS driven......although all the experts will tell you all sorts of other BS that they say has driven the markets.....in hindsight.

NOW......even though there are still some significant earnings to come.....no one is talking about earnings.The past 13 months of gains have occurred as the experts have been wrong time and again about earnings.

I dont see the climb of the past 13 months as insane.......I see the massive drops in great company stocks before that as insane. The gains of the past 13 months have simply......for the most part......been making up for the IRRATIONAL market drop that proceeded.

What the market has been doing and is doing is rational and forward looking. What was IRRATIONAL was the bear market hammering of companies for ZERO fundamental reason.

Actually.......NOTHING has changed......ALL the economic and FED news of the next six months to a year will be generally positive. As companies get out from under the overhand of the distortions of earnings from the pandemic and distortions of their business from the pandemic.....the likelihood for the markets will be GOOD.

NO ONE will ever fix the country.....it is not going to happen. What it is..... it is.....that is simply the baseline business conditions that companies will deal with going forward.

We have been in a little two week pause.....totally normal for any bull market. This is called...CONSOLIDATION.

Here is how I agree with Zukodany.......bull markets often climb a WALL OF WORRY. That is what we are seeing right now.....a continuation of that wall. A continuation of the negative view that is hammered every day.....24/7. It is constant and continuous. Yet when you look back the bull market will be CLEAR. I WELCOME that continued fear and negativity......it tells me we are a long way from a top.

As to "buyers"......they are not going to flood into the markets if there is a drop.....they will be running for the exits as usual. The crowd is NEVER right.

As to SUDDEN BIG GAINS......they happen all though investing history. That is why you have to be fully invested all the time....because the markets dont work as a smooth line up......the gains happen in big SPURTS that often come out of nowhere. AND........the reason they often come out of nowhere is because all the FOOLISH HUMANS are so caught up in the day to day news items, politics, drama, economic data, etc, etc, etc......that they cant see anything.

 

I have not said so for a while now.....but.....I see the greatest long term economic danger to the world and the USA as.....DEFLATION.

We were in a deflationary environment from about 2008 till the rise of inflation due to the STUPID economic shut down of the pandemic and the government spending spree of the past couple of years. As we now move forward from inflation.....most of which was caused by the distortions of the pandemic......we will once again be facing the prospect of deflation. The rise of AI and the ways it will impact society will contribute greatly to the underlying deflationary bias that has existed around the world for a long time now.

America's biggest brands rethink price hikes in disinflation era

https://finance.yahoo.com/news/amer...rice-hikes-in-disinflation-era-151854794.html

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

"During the historic run up in inflation America's biggest consumer brands justified their pandemic-era price increases by pointing to the ways Covid shocked the economy and the higher costs of doing business. Now that these broad conditions are subsiding, there are signs consumers are less willing to pay up.

As labor markets loosen and pricing pressures ease some consumer staples giants have experienced a drop in volume, suggesting that consumers are pushing back against higher prices, trading down to private labels or cutting back to save money.

Kraft Heinz’s (KHC), for instance, grew net sales 2.6% in its second quarter as it raised prices. But volumes dropped 7% year over year.

And Procter & Gamble (PG) CEO Jon Moeller said the company is emphasizing the value its products provide on packaging and in advertising to ensure they are grabbing the attention of consumers squeezed by higher prices. The company's volumes declined 1% in the latest quarter.

The volume declines highlight a conundrum for companies: "If prices are too high, companies will lose a significant number of customers but if prices are too low, they will lose significant profits," said Kristina Hooper, chief global market strategist for Invesco.

Customers’ pain at the register has become a defining feature of the US economy, and remains a dominant storyline in Washington and on the campaign trail. But as consumers start to expect some relief at the register, brands will face challenges to stay competitive.

Higher prices drove significant sales growth for businesses, and as that evaporates, "we do not foresee a meaningful uptick in volume from an industry wide perspective," said Jason English, managing director on the Food and Beverages team at Goldman Sachs Global Investment Research. Many companies, he said, will struggle to find growth.

Expect more sales and discounts

This earnings season several consumer brands highlighted how spending has remained resilient, even in the face of prolonged price increases, while noting shifts in behavior, as shoppers hunt for bargains.

Coca-Cola (KO) CEO James Quincey, highlighted the change in cost-conscious shoppers during the company’s latest earnings call. "They're looking for value and stocking up on items on sale. In these markets, our pricing is largely in place and is expected to moderate as we cycle pricing initiatives from the prior year," he said. In its most recent quarter, the company reported a 10% increase in price/mix, which incorporates price, product, and package size. Its North American volumes fell 1%.

Rival PepsiCO (PEP) noted during earnings that the majority of shoppers are staying faithful to its brands even as some consumers are "optimizing their budgets." CEO Ramon Laguarta said, "They're buying more in dollar stores or they're buying more in mass or in clubs."

As inflation overall trends downward, consumers may not feel the shift at the checkout line in the form of lower prices. "From a consumer price perspective we do not see a lot of deflation on the horizon," said English. "Instead, we see a moderation of inflation with a corresponding increase in promotional activity," he said, giving value seeking consumers opportunities to save money.

Unilever’s (UL) latest earnings report showcased how executives are navigating an inflation-comedown and recalibrating the balance of volume and pricing. The company's US market continues to grow as inflation eases, but consumers are starting to show signs of caution, said CFO Graeme Pitkethly.

The company’s divisions are each in a different phase in the inflation cycle, executives said, so looking at business groups where inflation has already come down offers a glimpse of things to come. In beauty and personal care, for example, the company said it started to see pricing moderate because inflation lessened and volumes picked back up. Results for the first half of the year “were really nicely balanced between price and volume,” said Pitkethly. Overall the company's volume fell just 0.3%, as it raised prices 8.2%.

"There is no question the consumer is running out of wallet, as seen by increases in credit card balances, and troublingly, use of ‘buy now, pay later’ for essentials such as groceries,"said Michael Farr, chief market strategist for Hightower Advisors, and founder and CEO of Farr, Miller & Washington. "Yet, the propensity to spend, as seen in aggregate demand, has been resilient.""

MY COMMENT

Consumer behavior changes on a dime. AND....the name of the game in the business world is STILL cost cutting and productivity.

Add in AI and the behavior of workers thinking they can avoid having to come back to work......and we are going to end up with HUGE job cuts over the next ten years. Companies WILL figure out how to operate with less and less workers.....or.....at least "employees". They will contract out work and expenses...... overseas.

 

A nice medium level LOSS for me so far today. Little surprise that my only three stocks that are UP today are.....HD, HON, and COST.

After this little dip.....my YTD is still at....+32%. Not a bad way to be entering the final 4.5 months of the year.

 

I had a larger loss this morning turn into a moderate loss this afternoon by the close. Same three stocks UP for me at the close....HON, HD, and COST. Also a losing day for me today compared to the SP500......by 0.64%.

Not a horrible little week....but still two in a row for the SP500.

 

All in all the BIG CAP side of the markets did ok this week. The DOW was UP and the SP500 had a very small loss. The averages that include all the smaller and mid cap companies and companies that are tech and/or risky were all down much more.

DOW year to date +6.44%
DOW for the week +0.62%

SP500 year to date +16.27%
SP500 for the week (-0.31%)

NASDAQ 100 year to date +37.53%
NASDAQ 100 for the week (-1.56$)

NASDAQ year to date +30.37%
NASDAQ for the week (-1.90%)

RUSSELL year to date +9.30%
RUSSELL for the week (-1.65%)

Last Friday my year to date was at +35.03% for my entire portfolio. Today a week later I am at +33.10% year to date for my entire portfolio.

 

HAVE A GREAT WEEKEND EVERYONE. LETS COME BACK ON MONDAY READY TO MAKE SOME MONEY.

 

I like this little article on NVDA. I will be curious to see how the stock moves over the next 8 trading days.....before it reports earnings. I will also be interested to see how it reacts to whatever the earnings are.

Nvidia’s AI-driven stock surge pushed earnings multiple three times higher than Tesla’s

https://www.cnbc.com/2023/08/11/nvi...shed-earnings-multiple-higher-than-tesla.html

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

"Key Points

• Nvidia’s surge past $1 trillion market cap puts it alongside household names Amazon, Apple, Microsoft and Alphabet.
• Baked into the stock price is a slew of assumptions about growth, including quadrupling net income this year.
• Nvidia’s graphics chips have proven to be the best for training AI models, and the company’s forecasts show insatiable demand.

Following last year’s market route in tech stocks, all of the industry’s big names have rebounded in 2023. But one company has far outshined them all: Nvidia.

Driven by an over decade-long head start in the kind of artificial intelligence chips and software now coveted across Silicon Valley, Nvidia shares are up 180% this year, beating every other member of the S&P 500. The next biggest gainer in the index is Facebook parent Meta, which is up 151% at Friday’s close.


Nvidia is now valued at over $1 trillion, making it the fifth-most valuable U.S. company, behind only tech behemoths Amazon, Apple, Microsoft, and Alphabet.

While Nvidia doesn’t carry the household name of its mega-cap tech peers, its core technology is the backbone of the hottest new product that’s quickly threatening to disrupt everything from education and media to finance and customer service. That would be ChatGPT.

OpenAI’s viral chatbot, funded heavily by Microsoft, along with AI models from a handful of well-financed startups, all rely on Nvidia’s graphics processing units (GPUs) to run. They’re widely viewed as the best chips for training AI models, and Nvidia’s financial forecasts suggest insatiable demand.

The company’s powerful H100 chips cost around $40,000. They’re being swept up by Microsoft and OpenAI by the thousands.

“Long story short, they have the best of the best GPUs,” said Piper Sandler analyst Harsh Kumar, who recommends buying the stock. “And they have them today.”

Even with all that momentum and seemingly insatiable demand, baked into Nvidia’s stock price is a slew of assumptions about growth, including the doubling of sales in coming quarters and the almost quadrupling of net income this fiscal year.

Some investors have described the stock as priced for perfection. Looking at the last 12 months of company earnings, Nvidia has a price-to-earnings ratio of 220, which is stunningly rich even compared with notoriously high-valued tech companies. Amazon’s P/E ratio is at 110, and Tesla’s is at 70, according to FactSet.

Should Nvidia meet analysts’ projections, the current price still looks high compared to most of the tech industry, but certainly more reasonable. Its P/E ratio for the next 12 months of earnings is 42, versus 51 for Amazon and 58 for Tesla, FactSet data shows.

When Nvidia reports earnings later this month, analysts expect quarterly revenue of $11.08 billion, according to Refinitiv, which would mark a 65% increase from a year earlier. That’s slightly higher than Nvidia’s official guidance of about $11 billion.

Investors are betting that, beyond this quarter and the next, Nvidia will not only be able to ride the AI wave for quite some time, but that it will also power through growing competition from Google and AMD, and avoid any major supply issues.

There’s also the risks that come with any stock flying too high too fast. Nvidia shares fell 8.6% this week, compared to a 1.9% slide in the Nasdaq, with no bad news to cause such a drop. It’s the steepest weekly decline for Nvidia’s stock since September of last year.

“As investors, we have to start wondering if the excitement around all the great things that Nvidia has done and may continue to do is baked into this performance already,” WisdomTree analyst Christopher Gannatti wrote in a post on Thursday. “High investor expectations is one of the toughest hurdles for companies to overcome.”

How Nvidia got here

Nvidia’s stock rally this year is impressive, but the real eye-popping chart is the one showing the 10-year run. A decade ago, Nvidia was worth roughly $8.4 billion, a tiny fraction of chip giant Intel’s market cap.

Since then, while Intel’s stock is up 55%, Nvidia’s value has ballooned by over 11,170%, making it seven times more valuable than its rival. Tesla, whose stock surge over that time has made CEO Elon Musk the world’s richest person, is up 2,279%.

Nvidia founder and CEO Jensen Huang has seen his net worth swell to $38 billion, placing him 33rd on the Bloomberg Billionaires index.

An Nvidia spokesperson declined to comment for this story.

Before the rise of AI, Nvidia was known for producing key technology for video games. The company, reportedly born at a Denny’s in San Jose, California, in 1993, built processors that helped gamers render sophisticated graphics in computer games. Its iconic product was a graphics card — chips and boards that were plugged into consumer PC motherboards or laptops.

Video games are still a big business for the company. Nvidia reported over $9 billion in gaming sales in fiscal 2023. But that was down 27% on an annual basis, partially because Nvidia sold so many graphics cards early in the pandemic, when people were upgrading their systems at home. Nvidia’s core gaming business continues to shrink.

What excites Wall Street has nothing to do with games. Rather, it’s the emerging AI business, under Nvidia’s data center line item. That unit saw sales rise 41% last year to $15 billion, surpassing gaming. Analysts polled by FactSet expect it to more than double to $31.27 billion in fiscal 2024. Nvidia controls 80% or more of the AI chip market, according to analysts.

Nvidia’s pivot to AI chips is actually 15 years in the making.

In 2007, the company released a little-noticed software package and programming language called CUDA, which lets programmers take advantage of all of a GPU chip’s hardware features.

Developers quickly discovered the software was effective at training and running AI models, and CUDA is now an integral part of the training process.

When AI companies and programmers use CUDA and Nvidia’s GPUs to build their models, analysts say, they’re less likely to switch to competitors, such as AMD’s chips or Google’s Tensor Processing Units (TPUs).

“Nvidia has a double moat right now in that they they have the highest performance training hardware,” said Patrick Moorhead, semiconductor analyst at Moor Insights. “Then on the input side of the software, in AI, there are libraries and CUDA.”

Locking in revenue and supply

As Nvidia’s valuation has grown, the company has taken steps to secure its lead and live up to those lofty expectations. Huang had dinner in June with Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co.

TSMC, the world’s leading manufacturer of chips for semiconductor companies, makes Nvidia’s key products. After the meal, Huang said he felt “perfectly safe” relying on the foundry, suggesting that Nvidia had secured the supply it needed.

Nvidia has also turned into a heavyweight startup investor in the venture world, with a clear focus on fueling companies that work with AI models.

Nvidia has invested in at least 12 startups so far in 2023, according to Pitchbook data, including some of the most high-profile AI companies. They include Runway, which makes an AI-powered video editor, Inflection AI, started by a former DeepMind founder, and CoreWeave, a cloud provider that sells access to Nvidia GPUs.

The investments could give the company a pipeline of growing customers, who could not only boost Nvidia’s sales down the line but also provide a more diverse set of clients for its GPUs.

Some of the startups are putting numbers out that show the sky-high levels of demand for Nvidia’s technology. Kumar from Piper cited comments from CoreWeave management, indicating that the company had $30 million in revenue last year, but has $2 billion in business contracted for next year.

“This is the representation of demand for generative AI type applications, or for voice-search applications, or generally speaking, GPU applications,” Kumar said.

Nvidia is now coming close to the midpoint of its current GPU architecture cycle. The latest high-end AI chip, the H100, is based on Nvidia’s Hopper architecture. Hopper was announced in March 2022, and Nvidia said to expect its successor in 2024.

Cloud providers including Google, Microsoft and Amazon have said they’re going to spend heavily to expand their data centers, which will mostly rely on Nvidia GPUs.

For now, Nvidia is selling nearly every H100 it can make, and industry participants often grumble about how hard it is to secure GPU access following the launch of ChatGPT late last year.

“ChatGPT was the iPhone moment of AI,” Huang said at the company’s annual shareholder meeting in June. “It all came together in a simple user interface that anyone could understand. But we’ve only gotten our first glimpse of its full potential. Generative AI has started a new computing era and will rival the transformative impact of the Internet.”

Investors are buying the story. But as this week’s volatile trading showed, they’re also quick to hit the sell button if the company or market hits a snag.

MY COMMENT

They control 80% or more of the AI chip market. That is total dominance......and..... reminds me of the Microsoft operating system monopoly of the 1990 to 2000 time period.

A very interesting company as a ten year hold....or even longer. As to the earnings in 1.5 weeks.....and the current price drop........I would NEVER try to time or play theses event as a trader or investor. But I am sure some will and a few will win big.

 

I agree Smokie. TSMC is the most significant external risk for Nvidia. There is BLACK SWAN potential with TSMC that could in a bad situation cause a HUGE panic......with NVDA and the markets in general.

 

Here is the POSITIVE view of the markets......

It’s only ‘halftime of this new tech bull market’—expect the sector to soar as much as 15% by year-end, top analyst Dan Ives says

https://finance.yahoo.com/news/only-halftime-tech-bull-market-164526055.html

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

"With inflation slowly fading and enthusiasm over artificial intelligence building, tech stocks have surged in 2023, kicking off a fierce debate on Wall Street.

There’s broad consensus among analysts that A.I. is set to change the world over the long term, but some more cautious minds argue that this year’s run-up in A.I.-linked stocks has created a “bubble-like euphoria” among investors—or even another hype cycle that could ultimately end in a crash. And when it comes to inflation, while some economists believe that a recent cooling has given the Federal Reserve the ammo to stop its raising interest rates, others argue the central bank’s battle for price stability is far from over, which could put pressure on stocks. In both of these debates, Wedbush tech analyst Dan Ives is on the side of the optimists.

“With the Fed waving the white flag on rate hikes, we see a green light risk-on environment into year-end and believe we are only in halftime of this new tech bull market raging into the next 12 to 18 months,” he wrote in a note to clients Friday.

Ives believes that inflation is fading and A.I. is “starting to quickly prove it’s not a hype cycle,” which should pave the way for tech stocks to soar another 12% to 15% through year-end. He pointed to strong spending on cloud infrastructure projects throughout the second quarter, driven by investments in A.I. technology. He argued that, over the next decade, A.I. will “conservatively” spur $800 billion in tech spending.

“Rome was not built in a day, and neither will the A.I. ecosystem, but let’s be clear, this build-out is unlike anything we have seen since the internet in 1995, and the ramifications are just starting to ripple through the consumer/enterprise landscape,” he wrote, comparing the rise of A.I. to the early days of the dotcom boom.

Despite fading inflation and the potential for A.I. to spur tech spending and increase productivity, tech investors have started to get cold feet over the past month.

After surging 38% through mid-July, the tech-heavy Nasdaq Composite has sold off in recent weeks, dropping roughly 5% since its July 19 peak. And shares of exchange traded funds that track A.I. stocks have seen an even more dramatic pullback—the Global X Robotics & Artificial Intelligence ETF, for example, is down 12% from its July 18 peak.

But Ives, who previously argued that A.I. is helping usher in a “4th industrial revolution,” believes investors need to “see through the trees” amid the pullback to the long-term potential of A.I.

“We are now in the use case study phase and build out stage of AI which ultimately is setting up for a massive cycle of spend for the likes of Nvidia, Microsoft, Google, Apple (AI App Store 2025 thesis), Oracle, Palantir, MongoDB, Snowflake, Salesforce, AMD, C3.AI, and many others,” he said, pushing off concerns about high valuations.

Ives isn’t the only analyst expecting a productivity and spending boom from A.I. Goldman Sachs analysts argued in an August 1 note that A.I. investments could top $200 billion by 2025, sparking a wave of “efficiency gains” for corporations.

“Innovations in electricity and personal computers unleashed investment booms of as much as 2% of U.S. GDP as new technologies were adopted into the broader economy. Now, investment in artificial intelligence is ramping up quickly and could eventually have an even bigger impact,” they wrote."

MY COMMENT

I agree with all the above in theory. BUT....theory and reality are often very different when it comes to business and advances.

SO....I hedge my bets by being extremely long term and investing in the BEST OF CLASS big cap companies.

 

Here is what I will call.....the NEGATIVE view of the markets.

Sluggish US earnings may need pick-me-up to support 2023 stock rally

https://finance.yahoo.com/news/sluggish-us-earnings-may-pick-211512022.html

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

"NEW YORK (Reuters) - Stock investors have been satisfied by middling U.S. corporate results so far this year but they might not be so easy to please for the rest of 2023.

As the second-quarter earnings season winds down, S&P 500 results are presenting a mixed picture, with companies beating analysts' profit expectations at the highest rate in nearly two years even as revenue beats dropped to the lowest since early 2020.

Investors appear content with that, for now. The S&P 500 has edged higher since earnings season began in July, with the benchmark index up 16% in 2023. But expectations call for corporate profits to pick up as the U.S. economy has so far defied recession fears, and investors may be far less forgiving if companies fail to deliver later this year, given the jump in equity valuations.

"Markets are expecting earnings to ... deliver above and beyond where they have been," said Eric Freedman, chief investment officer at U.S. Bank Asset Management. "This is a market that has moved up in anticipation of earnings that we have not quite gotten yet."

Overall, second-quarter earnings are expected to have fallen 3.8% from a year earlier, Refinitiv IBES data showed. That decline follows a 0.1% rise in the first quarter and a 3.2% drop in the fourth quarter of last year.

Results are expected to improve, however. Third-quarter S&P 500 earnings are seen rising 1.3% on a year-over-year basis, according to Refinitiv, before a 9.7% fourth-quarter earnings rise and a 11.9% full-year increase in 2024.

Meanwhile, the S&P 500 has become more richly valued. The index was trading at 19.1 times forward 12-month earnings estimates as of Thursday, compared to its long-term average of 15.6 times, according to Refinitiv Datastream. The P/E ratio ended 2022 at just below 17 times.

This year's valuation expansion accounted for 86% of the S&P 500's year-to-date return through July, with the rest of the market's boost coming from positive changes to earnings estimates, an analysis by Credit Suisse equity strategists showed.

"At this point, valuations have run ahead of the fundamentals and so companies now have to prove that they can generate earnings growth," said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

Q2 RESULTS

With 91% of S&P 500 companies having reported second-quarter results, 78.7% posted earnings above analysts' expectations, according to Refinitiv IBES. In aggregate, companies are reporting earnings 7.7% above expectations, up from a long-term average of 4.1% above estimates. Both the beat rate and surprise factor are coming in at their highest rates since the third quarter of 2021.

However, for revenue, only 62.9% of companies have topped expectations - the lowest beat rate since the first quarter of 2020.

Stock reaction to earnings results has also been tepid, with share prices posting weaker responses to both beats and misses than the average over the past five years, analyst Julian Emanuel of Evercore ISI said. The average stock fell 0.6% after results in the second quarter, Emanuel said in a note on Thursday.

"We went from a market that is saying, 'Earnings had to back it up' to 'Thankfully earnings didn't screw this up,'" said John Lynch, chief investment officer for Comerica Wealth Management. "That just gets us into a more expensive realm."

Meanwhile, there have also been some high profile disappointments, with Apple shares dropping 4.8% after the iPhone maker's weak sales forecast. Other megacap companies, such as Amazon and Alphabet, have seen a positive investor response to their reports.

Companies reporting results next week include key retailers, such as Walmart and Home Depot, while the release of monthly retail sales on Tuesday also could influence markets.

While investors generally have turned more positive about the economic outlook, some still are wary of a recession stemming from the delayed impact of higher interest rates, as indicators such as the Treasury yield curve are still flashing warning signs. Such a downturn could severely change the prospects for corporate earnings and potentially weigh on valuations. During recessions, earnings fall at a 24% annual rate on average, according to Ned Davis Research. "There is optimism, but I still wonder going into next year, are we too optimistic, from a consensus standpoint," said Comerica's Lynch. "Just because we didn't have a recession this year, that yield curve continues to point to one.""

MY COMMENT

I had to FORCE MYSELF to ignore and not bold all the positive in the above article. I wanted to try to emphasize the negative view.

Of course when I read this article to myself I tend to focus on all the positive information above.

BUT.....as I said.....I hedge my market bets by being extremely long term and investing in the best of the best big cap companies in the world.

NO.....I dont really try to predict the short to medium term market and economic direction (other than for fun in this thread). TIME is on my side......hopefully.....as an investor.

 

I anticipate that on Monday I will be doing some trades in my siblings account.

When they worked they never made more than $45,000 per year. NOW......they have an income in retirement of at least $200,000 per year. This income is generated by multiple income streams that I put in place for them since they retired. I have been managing their brokerage account for at least the last 35 years.

With a paid off house and no debt and no need to ever have to dip into their LARGE brokerage account......and with massive cash flow for their lifestyle.....I have a good chunk of money to invest next week. SO.......I will be buying the following:

MSFT
AAPL
NVDA
GOOGL
COST
HD

I will put $10,000 into each...except for NVDA which will get $15,000. When the trades happen......I am assuming on Monday....I will post it on here.

The only unfortunate thing for them........poor thing, cue the worlds smallest violin.........is the BIG taxes they now owe in retirement each year. I just tell them.....WELCOME TO MY WORLD.....although I have been able to do the opposite......and.....reduce my taxes to a very minimal amount in retirement compared to the very BIG taxes i paid during my work life.