The Long Term Investor

Want to know the real danger to the US economy? The real reason for inflation being a bit sticky? The issue the FED should be targeting but refuses to even mention? Here you go.

US budget gap soars to $1.7 trillion, largest outside COVID era

https://finance.yahoo.com/news/u-budget-deficit-jumps-23-200347158.html

 

You are right Smokie as usual.

We learned a lot when we moved from our low bank, close in, Puget Sound salt water frontage acreage to the....."CEO/Professional athlete.....neighborhood. Our goal moving there was that our kids would be able to grow up in a neighborhood with lots of other kids and go to great PUBLIC schools.

We were the youngest people in that neighborhood and probably the only small business owners. Most of the other people were CEO's or management at big companies or Professional athletes with various Seattle teams. It was kind of weird at first.....but.....in the end they were just regular people. They had all the same problems and issues as anyone.

In fact....even in that kind of environment....there is plenty of DOWNWARD MOBILITY....due to divorce, drugs, business failure, personal issues, bankruptcy, etc, etc, etc.

By the time we left to move back to Texas.......11 years later.....we knew everyone and and most were regular people....when you got down to it. Very few of them were born rich.........they worked hard and moved on up. At that point I was the President of our little HOA of 60-80 homes.

This was one of the longer places that we lived.....since we wanted to make roots for our kids. It worked out well for us.

 

Ok......the coming week.

Meta, Alphabet, Amazon, Microsoft highlight earnings barrage: What to know this week

https://finance.yahoo.com/news/meta...barrage-what-to-know-this-week-140009021.html

(BOLD is my opinion OR what consider important content)

"Big tech earnings will consume investor attention in the week ahead.

Microsoft (MSFT), Alphabet (GOOGL), Meta (META) and Amazon (AMZN) are slated to report while Coca-Cola (KO) and Exxon (XOM) will also highlight a busy week for corporate reports.

On the economic front, investors will closely watch Thursday's release of the first estimate of third quarter GDP, which is expected to show the US economy grew at an annualized rate of 4.3%. Friday will provide another look at the Fed's preferred inflation gauge.

The Big Tech reports come at a critical time for markets as 16-year highs on Treasury yields and uncertainty around when the Fed will reach the peak of its interest rate hike cycle have weighed on stocks over the past month.

Last week, the Nasdaq (^IXIC) fell more than 3% while the benchmark S&P 500 (^GSPC) dropped more than 2% and the Dow Jones Industrial Average (^DJI) slipped more than 1.6%.

The Federal Reserve enters its blackout period this week ahead of its next meeting, which begins on Oct. 31. The central bank leaves the public eye with markets pricing in more than a 96% chance that the Fed doesn't hike interest rates at the meeting.

Speaking at the Economic Club of New York on Thursday, Powell provided an update on the current state of the economy. He still sees inflation that's "too high" and could be threatened by the "very resilient economy."

Economists believed the speech likely closed the door on a November rate hike but kept options open for future meetings.

"The recent string of positive economic surprises will keep the Federal Reserve on high inflation alert, and although it won’t tilt the Federal Open Market Committee toward another rate hike at the November meeting, the December meeting will very much remain a 'live' one," EY chief economist Greg Daco wrote in a research note on Friday.

The week ahead will provide a look at metrics closely watched by the Fed: Economic growth and inflation. Thursday's GDP release is expected to present the high water mark for economic growth in 2023 after a string of resilient data has pushed out recession calls to 2024.

Data on Friday is predicted to show "core" PCE — which strips out the costs of food and energy — rose 3.7% over the prior year in September, down from 3.9% in August. The Fed targets 2% inflation, on average. Over the prior month, "core" PCE is expected to rise 0.3% in September.

The balance of those two prints will continue to be closely tracked over the next several months. Bank of America' US economist Michael Gapen explained how he understood the central bank's recent commentary on the two metrics in a weekly research note on Friday.

"Either growth will slow or inflation will start to move back up," Gapen wrote. "If growth slows, the Fed might not need to hike again. But if inflation picks up, further hikes would be warranted."

On the corporate side of the schedule, four of the "Magnificent Seven" stocks that have largely driven the 2023 stock market rally will provide quarterly updates, setting the stage for stock moves that could influence the major three indexes.

In an Oct. 12 note, a Bank of America investment strategist noted that without the Magnificent 7, the S&P 500 would be just below 3,900, or roughly 10% lower.

On a company level, all four of the big tech companies will provide insights into consumer spending, artificial intelligence updates and the advertising industry. Revenue numbers for cloud segments will remain in focus at Microsoft and Amazon, too.

The AI story is expected to be company-dependent. UBS' team of analysts wrote that Meta, which benefited from an AI bump last quarter, could still have more room to run off thepromise the technology offers.

"We like META, and despite elevated expectations into 4Q, we think the GenAI consumer app bull case is still under-appreciated and not priced into shares," UBS analyst Lloyd Walmsley wrote in a research note on October 16.

Meanwhile Walmsley's colleague, Karl Keirstead, doesn't see meaningful AI contributions for Microsoft this quarter.

"While the key AI lifts aren’t landing in the 1Q/Sept quarter, the stock set-up is now cleaner with more modest growth expectations into the print," Keirstead wrote in a Microsoft preview note.

Broadly, the stock market story has been less about earnings and more about higher yields and what they could mean for the Fed.

Bond yields have soared since the last time the Fed met in late September. Yields on both the 10-year and 30-year Treasuries are at 16-year highs, and some Fed officials have remarked that the financial tightening brought on by an increase in yields could effectively take place of another Federal Reserve interest rate hike.

"We have to let this play out and watch it," Powell said at the Economic Club of New York on Thursday. "But for now it's clearly a tightening in financial conditions and so we'll be watching it carefully."

A more exact answer from the Fed chair in two weeks could be the key to freeing stocks from their bond beholden misery.

"It's all about the Fed," Invesco chief markets strategist Kristina Hooper told Yahoo Finance Live on Friday. "Once we get clarity from the Fed that the rate hike cycle is over, and we have more of a sense of the rate cuts coming in 2024, that to me will mark a very significant shift for markets where investors can become more risk on, where we're likely to see yields start to fall.""

MY COMMENT

WELL.....it is going to be a week where we see if earnings will matter this time around. Since I see little to no commentary about earnings....I suspect....that the markets simply will not care.

Of course.....if this happens.....this tells me that the markets are now totally divorced from reality......since earnings are the primary FUNDAMENTAL factor that should determine the course of any specific individual business.

Are we now in a market phase where individual business fundamentals do not matter....and.....it is all about the broad averages? I hope not......but it may be true....at least for the short term.

 

Same old....same old....market at the open today. But.....at least the markets are recovering from the opening numbers. I expect that we will see green....but no guarantee for the close.

 

Ignoring the markets for now.

The US economy ended Q3 on a positive note.

https://www.fisherinvestments.com/e...apshot-retail-sales-and-industrial-production

(BOLD is my opinion OR what consider important content)

"Stocks may have moved on from Q3’s economic data already, but that doesn’t make the latest September readings unimportant. As it happens, there are some interesting nuggets in US retail sales and industrial production, both of which hit the wires Tuesday. They won’t tell you where the economy is going from here, but they show the gap between reality and expectations remains plenty wide—fuel for stocks.

Shoppers Aren’t Cutting Back

Headline retail sales decelerated a smidge, from a fast 0.8% m/m in August to a still-fast 0.7%. But August’s figure was skewed by something rather unpleasant: higher gas prices. The Commerce Department doesn’t adjust monthly retail sales for inflation, so pricier gas flatters the headline total—even if it forces people to cut back a bit elsewhere. Excluding gas stations, retail sales rose a much milder 0.3% m/m in August.[ii]

But gas was apparently less of a factor on September’s headline reading. Prices stayed elevated throughout the month, hitting their year-to-date high in the week of September 18 (mercifully, they are down about 30 cents per gallon since then).[iii] And gas station sales rose 0.9% m/m, which is fast, but not close to August’s 6.7% rise, giving shoppers more leeway to spend their rising wages on other, more pleasant things like dining out.[iv] As a result, sales ex. gas stations sped to 0.6% m/m. Zeroing in on the categories that feed into GDP—retail sales ex. food service, gas stations, car dealers and building materials stores—“control group” sales accelerated from August’s 0.2% m/m to 0.6%.[v] Core demand looks to be in good shape. Of course, these data being nominal complicates the view. But slowing core inflation suggests this wasn’t a huge factor last month.

Now, economic improvement has been the talk of the town for weeks, fueled by the Atlanta Fed’s real-time GDP reading pointing to a big Q3 acceleration. Yet even with this chatter, economists weren’t expecting much from retail sales. All the aforementioned splits beat expectations by 0.4 or 0.5 percentage point. This tells us sentiment still hasn’t caught up with the economy’s strength, probably because all the “higher for longer” interest rate chatter has people feeling a bit blue. Eventually people will get wise and good data will lose some surprise power, but we aren’t there yet.

So Much for the UAW Strike Hitting Car Production

When the United Auto Workers (UAW) union hit the picket lines halfway through September, most presumed falling auto production was a foregone conclusion. Even though the strike started small and spread gradually to more plants, idled factories are idled factories, making production increases a tall order.

But not too tall, apparently. Buried in the news that headline industrial production rose 0.3% m/m with manufacturing output rising 0.4% was this little nugget: Production of motor vehicles and parts rose 0.3%.[vi] Even with some assembly lines dark. Now, comparing September’s output to August’s probably isn’t the most telling reading since the Fed reported some seasonal adjustment difficulties tied to annual factory maintenance shutdowns in July. That caused a big one-off auto production jump in July, which reversed sharply in August. A lot of that is statistical noise. But September’s level of motor vehicle and parts production was 2.1% higher than June, suggesting things are on pretty good footing overall.

Auto production is far from the lifeblood of the US economy or even manufacturing. But here, too, the gap between reality and expectations is telling. When the strikes began, we saw numerous economists project falling auto production and, if the strike spread wide enough for long enough, falling GDP. But as it stands, we are a long way off from that, with auto production not even in the red yet—to say nothing of spillover. Given how short past strikes have been—and how limited their economic impact has been—we think there is still plenty of room for reality to beat meager expectations."

MY COMMENT

There appears to be a lot of negativity out there right now. Although in my limited daily contact with people around me....I dont see or hear much.

But....yes....the economy in general is much stronger and in better shape than all the indicators seem to indicate.

Some day the markets will catch up with this reality.......and.....ditch the short term drama.

 

A moral victory.....the NASDAQ has now turned green.

 

The....breathless, drama-queen.....story of the day.

Benchmark 10-year U.S. Treasury yield tops 5%

https://finance.yahoo.com/news/treasuries-ten-u-treasury-yield-091047629.html

Although anyone age 35 or younger has never seen......"NORMAL"....interest rates in their ADULT lifetime (since year 2008). So it is no wonder that the fear mongering and drama works to shake things up in the markets short term.

 

In spite of all the negativity being thrown around lately in the tone of financial media articles.....we are not even close to being in a correction. So....I will simply ignore it all.

 

I was thinking of you Oldmanram.....as I was siting in the traffic on 290/71 yesterday near the formula 1 site here in Austin.

One of my favorite hat shops is in San Antonio. If you get down there to see the Alamo....you will be close to it since it is only a few blocks away. Here you go:



https://parishatters.com/

 

I see today as one of those "sit and wait" days in the markets. They are waiting for the earnings that will happen later this week.

But that does not mean those earnings will actually have much impact even if they are nice BEATS. We see this all the time....the markets waiting for some event and going sideways...but....when the event actually happens there is no response. The REALITY of short term market action and thinking.

At least the SP500 has now decided to join the NASDAQ in the green. Whoops.....before I could post this it went back red....oh well.

 

If you do make it to the Alamo it is only a few blocks away. Dont forget to also take in the "River Walk" if you go to San Antonio......it is well worth the time to visit it. If you have time take one of the boat tours to get a feel for the beauty, and length of the River Walk.

If you visit the River Walk you might want to eat at "Casa Rio"......a very old time historic Tex Mex place on the river. Very scenic.

https://www.casario.com/

"Founded by Alfred F. Beyer in 1946, Casa Rio sits on land first granted title in 1777 by the King of Spain. Our Spanish Colonial period hacienda became the core of the new business. The cedar door and window lintels, the fireplace, and thick rock walls, are still evident inside the building.

Casa Rio was the first San Antonio business to open its doors to the River and take advantage of the setting. Canoes, gondolas, and paddle boats, evolving into tour and dinner boats, began here and helped create the Riverwalk of today."

The river Walk is the main tourist destination of San Antonio.....it goes for miles.

 

My personal favorite Mexican Restaurant in San Antonio is "La Fonda Alamo Heights" Our family has been going there since the 1950's.

8633 Crownhill Blvd | SAN ANTONIO, TX 78209

https://lafondaah.com/

Not to be confused with the also popular restaurant...."La Fonda On Main"

 

Oh right....this is an investing board not a tourist board.

WOW.....I looked at my account just before I got into talking about San Antonio. I have a nostalgic soft spot for that city since that is where I grew up. But....I left after High School and have never lived there since.

I have a very surprising large gain going on so far today. Only a single stock down......AAPL..... and when I looked it was only down by 0.01%.

 

Ok back to the important stuff.....if you do get to San Antonio Oldmanram.....I recommend parking in the "River Center" garage downtown. That is a perfect central location to park for the Alamo, River Walk, and all the other things you might want to do in the Alamo area.

 

I found this little article on Fox Business.....some good general advice for investors and others. It is all about PROBABILITY.

Poker pro Annie Duke warns against small losses leading to 'terrible decisions'
All investing decisions are ‘bets against ourselves,’ the former world poker champ says

https://www.foxbusiness.com/lifesty...warns-small-losses-leading-terrible-decisions

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

"With adrenaline pumping and your money on the line, sometimes brash decisions aren’t always profitable ones.

Author and former U.S. professional poker player Annie Duke noted close comparisons between smart bets on the table – as well as the stock market – in a special townhall episode of "Making Money with Charles Payne" Thursday.

"The problem that poker is, is that you don't know what other people's cards are and there's a lot of luck involved, like on the turn of the card. So in that sense, when we think about betting at poker, we're investing our money in a particular decision that we think is going to have the best outcome," Duke told Payne.

"So we can take that away from the poker table and say that's really what we're doing with all of our decision-making," she continued. "So when I say that all decisions are bets against ourselves, we can think about any different outcome that might happen as some different version of ourselves that might occur in the future."

Duke, who "fell in love" with poker at age 18 thanks to her brother, worked her first job at Kentucky Fried Chicken before attending Columbia University where she pursued a double major in English and philosophy. She then earned her Ph.D. from the University of Pennsylvania in cognitive linguistics.

Author and former poker player Annie Duke advised not getting "caught up in momentary ups and downs" on "Making Money with Charles Payne" Thursday, October 19, 2023. (Getty Images)

Though she thought she’d stick with higher education and become a professor, a chronic illness prevented Duke from doing so, so she turned to poker to make some money. By the time she retired in 2021, Duke earned a World Series of Poker champion bracelet and was the only woman to win the Tournament of Champions.

Poker players and investors both devote resources, time, attention, money and effort into their winnings, Duke noted, while emphasizing the importance of envisioning long-term impacts.

"We get really caught up in losses in the moment that make us make terrible decisions when we're losing. Our decision-making really goes kind of off the rails. So what we need to try to do as decisionmakers is to not get caught up in the momentary ups and downs, but to start to think about the long view," she encouraged.

Her best Wall Street example? Berkshire Hathaway’s daily stock volatility.
video

"If you look at it from the long view over the whole course of the existence of Berkshire Hathaway, obviously it has vastly outperformed the S&P 500. And it's a stock that you would want to own," Duke explained. "So one of the things that we need to do to be more intelligent investors is to stop getting caught up in the momentary ups and downs and to start thinking about what is good in the long run so that we can make better decisions that are going to benefit our future selves."

Amidst social media and financial advice noise, Duke further warned against the cons of instant information and getting caught up in immediate market "ups and downs."

"To help ourselves to be better at this is to start planning ahead," the poker pro advised. "Instead of trying to make a decision in the moment that some investment shoots up or in the moment that some investment shoots down, we need to think in advance as we make the investment about what the conditions are under which we might invest more, under which we might actually choose to divest, [or] to take risk off."

She argued that the more we can pre-commit to decisions of the future, "the better off we’re going to be."

"One of the simplest examples of that is to set stop losses and take gains and actually stick to those," Duke said, "because then we're not making the decision about whether to stop the loss when we're actually in the moment of losing."

MY COMMENT

YEP....I do agree. Much of investing is being aware of and using the PROBABILITY to push yourself to success.