The Long Term Investor

I could not tell you a thing about the markets after my last post this morning. I never looked for the rest of the day. My account....in the red for the day of course. I also got beat by the SP500 by 0.17% today.

I dont even have to look.......a meaningless market today....that IGNORED the great earnings and simply went down for NO real reason....other than it could.

 

I see that Treasury Yields were the culprit today. NEVER MIND......the link to the historic Ten Year Rates that I posted above that shows that the HIGH rates right now are at the low end of the chart for the past 54 years. I mean.....come on....if the media tells you rates are high they must be high......right?

 

God help the poor home buyers.

Mortgage rates top 7%, hitting 21-year high

https://finance.yahoo.com/news/mortgage-rates-top-7-hitting-21-year-high-160707969.html

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

"Mortgage rates surpassed 7% this week, hitting the highest level in more than two decades.

The average rate on the popular 30-year fixed mortgage increased to 7.09% this week, up from 6.96% the week prior, according to Freddie Mac's release on Thursday. That's the highest point since the first week of April 2002 and marks just the third time rates have exceeded 7% since then. The last times were in October and November of last year, when the rate reached 7.08%.

Rates have been on a choppy rise since the onset of the year as the Federal Reserve fights to wrangle inflation. The increase this week further deteriorates affordability for budget-conscious buyers who are facing elevated home prices and a shortage of choices because homeowners remain reluctant to sell and give up their lower mortgage rate.

"I think what we're seeing is the Fed’s efforts to crush inflation are in turn starting to crush demand," National Association of Home Builders CEO Jim Tobin told Yahoo Finance Live (video above). "And 7% mortgage rates are really keeping people on the sidelines [and] keeping people in their existing homes."

The volume of purchase applications for a mortgage declined by 0.8% from one week earlier to its lowest level in nearly seven months, the Mortgage Bankers Association (MBA) survey for the week ending Aug. 11 found. Overall, purchase demand was 26% lower than the same week a year ago.

The decline in activity was driven by the increase in rates, the MBA noted. The share of applications for adjustable-rate mortgages — which typically come with lower initial rates than fixed-rate mortgages — increased to 7%, the highest level since April 2023, further confirming that borrowers are seeking relief.

"It’s brutal out here. Highest rates in 20 years and getting worse," Jason Sharon, owner of Home Loans Inc., told Yahoo Finance. "I believe people still want to own homes, [but there are] just so many that cannot afford it based on the combination of higher home prices and rates."

Mortgage rates will need to fall quite a bit to reverse the dynamic in today’s market, Len Kiefer, Freddie Mac’s deputy chief economist, told Yahoo Finance.

"We can't be sure where rates may go in the future," Kiefer said. "But if rates don’t drop sharply from today, refinance volume is likely to remain near historical low levels and the mortgage rate lock-in effect is the largest ever — further reducing already the slim inventory of for-sale homes."

While the available inventory of unsold single-family homes increased by less than 1% for the week ending Aug. 14 to 492,000, that's still 10% fewer than last year. And the seasonal gain may mean that more potential buyers have called it quits, according to Altos Research.

"It looks to me like one of the signals of slightly fewer buyers," Mike Simonsen, CEO of Altos Research, wrote in a blog post. "In the first half of the year, inventory declined because demand was greater than the season would indicate. Now that extra little boost of demand seems to be gone from the housing market.""

MY COMMENT

BUMMER. We would have given anything for a 7% rate back in the 1970's and 1980's. I bought my third home on a 12% real estate contract. I dont think we ever had a mortgage rate below 5-7%.

Of course we went to free and clear ownership in about 1985......and never looked back from there.

 

HERE is the.....big bump up in the Treasury yield.

10-year yield rises to highest level since October 2022

https://www.cnbc.com/2023/08/17/us-treasury-yields-nvestors-digest-fed-meeting-minutes.html

MY COMMENT

OMG......the highest rate in.........yes you got it.......10 months. WHAT? Ten months? That is yesterday in terms of the markets. COME ON MAN.

 

Not necessarily a bad thing for the markets to take a breather. It will help to consolidate things and build up pressure for the next move up.

 

Same day today as all week......China and rates. Nothing else in the news. No change to the GREAT earnings.

The short term direction is simply DOWN right now. It will just stay that way....until it changes. When will that be.....I have no idea.

 

A TYPICAL headline lately.

Deere Earnings Smash Wall Street Estimates. Here’s Why the Stock Is Falling.

Actual results do not matter at this moment. ALL that matters is the opinions and beliefs of......."investors".....no matter what they are based on or how delusional they are in the face of actual fundamental data like earnings.

This sort of social media and Insta driven brain behavior.......with extreme focus on the short term and instant gratification......when carried to the extreme....WILL eventually kill the markets.

 

My take on the current market.......we are in a MINI-CORRECTION.

The general averages have now been down for about three weeks. I am NOT counting on the NVDA earnings to change this next week. I have seen many great earnings reports disrespected and ignored lately. NVDA appears to be so extreme in the expectations that there is no way the markets will be happy even with an EPIC beat.

I am guessing that this situation that the markets are in right now will continue for at least 2-4 more weeks and will continue till it is an ACTUAL correction.....averages down by 10% or more. This is a normal part of the market process. It happens once or twice EVERY year. There is nothing unusual to see corrections happen during a bull market.

Stocks go up in spurts. There is no way to predict when they will happen. In between those spurts there are often times where the markets linger or go down as prices and the markets consolidate the prior gains.

BUT.....one thing is sure.....the great earnings that we are seeing are money in the bank...over the longer term. It will be a HUGE HELP to the fundamentals going forward that we are now getting beyond the extreme and distorted business conditions of the pandemic. Many companies like AMAZON saw positive....but very distorted......results during the pandemic. This has made for difficult comparisons over thee past year or so. We are now about done with that time period......as a basis for comparison..... as we move forward.

 

You are EXACTLY RIGHT Emmett. I saw an article earlier talking about how it is impossible to understand the Target earnings versus the Walmart earnings. Of course NO mention at all of the Social Issue impact on various businesses.

I dont care what your politics or issues are.......if you piss of half your potential customer base.......you are an IDIOT. Stick to the only thing that counts.....business.

 

Here is the article I am talking about above. Note the confusion of the writer......although they totally ignore the OBVIOUS.

Mixed signals from retail week: Morning Brief

https://finance.yahoo.com/news/mixed-signals-from-retail-week-morning-brief-100026331.html

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


"This has felt like a weird week for investors, in part because the US economy is looking really weird.

On the one hand, we got to digest better-than-expected retail sales for July. My first thought when I saw the results was that maybe the consumer has some spending power left despite two years of rampant inflation.

"The economy is so hard to predict," Cisco chairman and CEO Chuck Robbins told me midweek at our NYC headquarters. I agree with Chuck!

Then there was the mother of all weirdness: This week's reads on US consumers apart from the barrage of upbeat government data, which I never have been a fan of.

Home Depot's CEO Ted Decker opted against making a bottom call for the economy and housing market earlier in the week.

Cheap chic merchandise purveyor Target issued a big-time earnings warning for the full year.

When I caught up with Target CEO Brian Cornell and CFO Michael Fiddelke, they voiced greater concern about the economy than the last time we chatted about earnings three months ago.

Fiddelke specifically called out looming student loan repayments as a key factor in some very cautious third quarter guidance — even if some analysts are downplaying it.

Cornell said the back-to-school shopping season had a "solid" start, but to me that rings hollow given the 5.4% comparable sales drop and guidance cut.

A day after Target reported, Walmart blew the minds of an already bullish Wall Street. Big sales gains in stores and online. Grocery sales crushed it. Full-year guidance lifted. What a different vibe than Target's earnings!

"Historically, our value proposition has been known for everyday low prices and for providing that value for customers. And what we see right now is that convenience resonates just as much to our customer base. And if you're a household that makes over $100,000 a year, you value convenience just as much as the next person," Walmart CFO John David Rainey told me.

The read from those I talked with: This was another quarter where higher-income households traded down from Target and went to Walmart.

But what's unclear is why are they trading down at all given the strength we're seeing in other categories, like fast-casual restaurants?

IPO juggernaut Cava came out with an incredible earnings report this week showing same-store sales up 18.2%. People may be trading down, but they're still spending.

My Cava bowl last weekend on Long Island cost $16. Sure, I got a ton of food. But I used to be able to feed myself for days for $16! So while people are cutting trips to Target and Home Depot, they apparently have a few bucks for a $16 Cava bowl with crazy feta in an urban market.

In my view, the economy is weird right now, and stock prices aren’t priced for weird. Keep that in mind as the calendar turns to fall."

MY COMMENT

NO...the economy is not weird. People are the same as always. They dont want to be lectured by their store. People will shop based on value but they are STILL more than willing to spend more money for what they like.

Good business leaders and good management know how to walk the current SOCIAL TIGHTROPE.....they stay out of the social stuff and concentrate their customer base......welcoming all types and opinions. They stay out of politics. They stay out of religion.