The Long Term Investor

The greatest danger to the rate cuts is NOT a strong economy.....it is government. We have the FED....supposedly....fighting inflation....and at the same time we have government spending at historic levels....even for government....and driving inflation higher with every policy they push.

 

To continue the above.

A strong economy isn't a risk to the Fed's rate cut plans: Morning Brief

https://finance.yahoo.com/news/a-st...s-rate-cut-plans-morning-brief-110006379.html

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

"The US economy began 2024 where it (mostly) left off 2023 — surprisingly strong.

In turn, investor expectations for interest rate cuts from the Federal Reserve have been pushed out into the future. But a strong economy is an asset, rather than a risk, to the Fed's plans.

In its forecasts released in December, Fed officials saw real GDP growth in 2024 coming in at 1.4%. Over the long run, officials see the economy growing at a rate of 1.8%. So not only were these forecasts calling for the rate of growth in 2024 to be sharply lower than the 2.5% increase seen last year, but for this year's economy to come in below potential.

Wall Street forecasters are similarly cautious.

As of Monday, the Atlanta Fed's GDPNow forecast showed the US economy is set to grow at an annualized rate of 2.9% in the first three months of 2024; Wall Street forecasts peg growth closer to a rate of 1.8%.

In a note to clients on Monday, Neil Dutta at Renaissance Macro wrote that "consensus is beginning to come around to a stronger growth view," as these "Blue Chip" forecasts have been consistently on the rise since December.


Recent data shows the US economy is on track to grow much faster than Wall Street forecasts suggest in the first quarter of the year. (Source: Atlanta Fed)
Still, Dutta argued that it is time for Street consensus to "wake up" when it comes to the growth outlook.

"According to the latest Blue Chip Quarterly Consensus Forecast, real GDP is expected to climb no more than 2.1% at an annual rate in any quarter between now and Q4 2025," Dutta wrote. "Moreover, a slowing in growth is expected between Q1 and Q2 2024."

"I am sorry, but these forecasts do not make any sense to me," Dutta added.

In Dutta's view, expectations around consumption are too conservative. Moreover, recent survey data, along with higher stock prices, makes an increase in business investment likely.

All while inflation expectations suggest strong inflation figures posted earlier this month — and expected later this week — don't change "the overarching story on inflation."

"Underlying inflation is slowing, and this puts the Fed on a path to recalibrate monetary policy," Dutta wrote.

As Josh Schafer reported last week, consensus forecasts now have the Fed cutting rates three times in 2024, down from six expected cuts when the year began. In December, the Fed's own forecasts suggested three cuts would be warranted this year.

Investors, by and large, remain focused on rate cuts. And for good reason — all else equal, nothing matters more for valuations than interest rates.

But the story underwriting these revised views on rate cuts is much simpler than calculating the discounted value of a company's future cash flows or doing a close reading of the latest round of commentary from Fed officials.

The story is simply about growth.

'The bulk of the negative shock has passed'

Elsewhere in his note, Dutta also raised a more heady observation about the nature of how monetary policy functions in the modern marketplace.

One of the most popular descriptions of monetary policy is that it works on a long and variable lag.

Paraphrasing the work of economist Milton Friedman, this idea captures the uncertainty with which the Federal Reserve and other central banks operate along the axes of both time and magnitude.

The question of how high or low interest rates should be set, and for how long they should remain at any one level, is answered slowly and piecemeal.

As Fed Chair Jerome Powell said in his first Jackson Hole speech after taking the top job, navigating policy by the "stars" of natural unemployment, the neutral rate of interest, and the Fed's inflation target "... can sound straightforward. Guiding policy by the stars in practice, however, has been quite challenging of late because our best assessments of the location of the stars have been changing significantly."

And there is no doubt that changes in the economy since the pandemic began four years ago have been significant. But the scope and scale of these shifts, however, have begun to call into question this central idea of how monetary policy works its way through the system.

"The consensus appears to continue believing that lags from prior monetary tightening are non-linear in nature," Dutta wrote. "The consensus is marking to market the near-term view, only to push the slowdown off by another quarter."

In other words, a long and variable lag for policy means any negative impacts not yet experienced have been delayed, rather than averted.

"Under this theory," Dutta continued, "higher rates have minimal effects up front, the economy performs well, and then suddenly, the economy spontaneously combusts. I'm skeptical."

"The lags are shorter today; after all, the Fed first broke the housing market without lifting the federal funds rate. Financial market conditions tell a simple tale as well: the bulk of the negative shock has passed."

One of the most enduring debates in markets is whether the stock market is the economy. In other words, does a rising stock market mean the underlying economic fundamentals are improving?

On balance, I tend to come down on the side of yes.

And the market's behavior over the last 15 months is a case in point.

Entering 2023, a recession in the US economy was preordained by most on Wall Street. Instead, economic growth accelerated and the S&P 500 rose 24%.

In 2022, in contrast, the S&P 500 fell nearly 20%. And, as Dutta noted, the housing market was "broken" by the Fed as it aggressively raised interest rates. All while consumers grappled with 40-year highs in inflation.

Though headline economic data in 2022, bolstered by nonresidential investment and a strong dollar, didn't reveal a recession defined by consecutive quarters of headline GDP contracting, most consumers felt many of the hallmarks of an economic downturn.

And while there are pockets of weakness in the economic backdrop right now — white collar employment trends come to mind — financial markets appear firm in their assessment."

MY COMMENT

We should be careful what we wish for.....inflation in the 1.5% to 2% range is....DEFLATION.

The economists have continuously underestimated the economy over the time of this bull market....the last 1.5 years. AND....being economists....they look at everything under the lens of economics. First economics is NOT science or anything other than opinion, theory and guesswork. Second the markets are NOT economics.

 

A valid warning.

Warren Buffett says the stock market is increasingly ‘casino-like’—and young investors need to remember this ‘one fact of financial life’ to avoid the mess

https://finance.yahoo.com/news/warren-buffett-says-stock-market-212445057.html

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

"Berkshire Hathaway CEO Warren Buffett shared a moving tribute to his fallen friend and right-hand man Charlie Munger in his annual shareholder letter over the weekend. The Oracle of Omaha lauded Munger as the “architect” of Berkshire’s success, eulogizing the “abominable no-man” by discussing some of his favorite whipping posts—including his comparison of the modern stock market to a casino.

“For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young,” Buffett wrote, adding that “though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school.”

Buffett’s words of caution were definitely a throwback to some of Munger’s favorite lines. Throughout his more than 75-year career, Munger argued that there were two types of people who buy shares in the stock market: investors and speculators. The investors—who are, above all, disciplined, hard-working, and thoughtful when buying assets—were always Munger’s people. But the speculators—those who seek nothing more than a quick buck without care for the intrinsic value of what they’re buying—well, Munger really didn’t like them much.

"They love gambling, and the trouble is, it's like taking heroin,” he said in an April 2022 interview with Berkshire Hathaway investment officer Todd Combs. “A certain percentage of people when they start just overdo it. It's that addictive. It's absolutely crazy, it's gone berserk. Civilization would have been a lot better without it."

Like Munger, Buffett fears that too many modern investors have become entranced by speculative investing. Rather than digging into Securities and Exchange Commission (SEC) filings to find the best possible business to invest in, too many investors, particularly young investors, are simply buying stocks that are trendy, hoping someone else will pay more for them a few months, days, or even hours down the line. What or who does Buffett blame for this rise in “casino-like” behavior in the markets? Well, the democratization and gamification of trading is certainly not helping. As the billionaire put it: “The casino now resides in many homes and daily tempts the occupants.”

Becoming a stock market ‘casino’

Part of the reason the stock market is becoming increasingly “casino-like,” according to Buffett, is simply that buying and selling stock has never been easier—or more fun—due to the rise of online trading applications. The SEC is happy about the first part of that sentence, but not so much the second. Here’s how SEC Chair Gary Gensler put it in a statement in 2021 after launching an investigation into the gamification of trading applications:

“While these new technologies can bring us greater access and product choice, they also raise questions as to whether we as investors are appropriately protected when we trade and get financial advice…In many cases, these features may encourage investors to trade more often, invest in different products, or change their investment strategy.”

Like Gensler, Buffett is worried that the gamification of trading is leading to an increase in speculators in the market, and in this modern era of connectivity, the Berkshire CEO worries that could lead market “panics” to happen more rapidly.

“Speed of communication and the wonders of technology facilitate instant worldwide paralysis, and we have come a long way since smoke signals,” he warned. “Such instant panics won’t happen often—but they will happen.”

Remember this key ‘fact of financial life’—and you’ll avoid gambling in the market

For the speculators that are using the stock market like a casino, Buffett had one main tip: Remember who is really making money from your gambling—the House.

“One fact of financial life should never be forgotten,” he wrote. “Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens’ juices to flow is feverish activity.”

Modern brokerage firms, at times, entice investors into stocks or complicated derivatives with new and fancy features on their trading apps. But they aren’t doing it to help the average retail investor, they’re doing it because they make money from fees on every trade. That means the more trades, the better it is for the House, even if that’s not true for investors.

During periods where more of the general public gets interested in stocks, Buffett explained, “whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone.”

The Berkshire CEO noted that when the scene then “turns ugly,” and speculators lose money during a market meltdown, they shouldn’t expect a helping hand—or justice—either.

“The politicians then become enraged; the most flagrant perpetrators of misdeeds slip away, rich and unpunished; and your friend next door becomes bewildered, poorer and sometimes vengeful,” he wrote. “Money, he learns, has trumped morality.”

This story was originally featured on Fortune.com"

MY COMMENT

YES....trading is now pushed strongly by the investment business. first they make money from the trading......and second....they love the speculative turmoil and volatility it creates....since they are often AI PROGRAM trading against and with the markets.

A very popular game.....but a fools game. Slow and steady....over the long term is STILL the only path to success....whether anyone is doing it or not.

 

Here is a different view on NVIDIA.

Artificial Intelligence?

https://alhambrapartners.com/2024/02/25/weekly-market-pulse-artificial-intelligence/?src=news

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

"Nvidia reported earnings last week and they were, to be sober about it, incredible. Total revenue rose to $22.1 billion for the quarter, up 22% from last quarter and 265% year-over-year. Data center revenue, which is what investors really ought to be watching with this company, was up 27% from last quarter and a whopping 409% year-over-year. Gross margins run to 75%, operating margins of 54%, net margins of nearly 50%, and return on equity of 99%. It is a truly stunning performance and the stock has responded by rising 60% since the beginning of the year and nearly 240% over the last year.

Nvidia has been a pretty good chip company for a while, specializing in graphics processing units, which have traditionally been used primarily in gaming. They have also been used over the last few years in cryptocurrency mining. We looked at the company a couple of years ago and didn’t invest – wrongly as it turns out – for a number of reasons. We were particularly concerned that the crypto business surge in 2020/21 was unsustainable and we think we were right to stay away as total revenue was flat in 2023 while earnings fell 25%. What we didn’t see coming was the AI surge that has pushed the company to incredible growth over the last year. Even those who saw AI as an important technology would probably admit, if they were honest with themselves, that they didn’t foresee the tsunami of cash that would be thrown at anything that could be credibly – or incredibly – connected to AI.

The question for anyone who owns the stock or is considering owning it, is not what did it do in the past but, rather, what might it do in the future. And we’d point to that surge in crypto revenue that wasn’t sustained as a potential model. I spent quite a bit of time this last week working with the various LLMs out there and I was both amazed and underwhelmed at the same time. It is true that some mundane tasks can be automated with these AI models but it is still fairly crude and requires – for anyone interested in accuracy – a lot of human intervention. Will they improve? I’m certain they will but no one should be fooled into thinking that Artificial Intelligence involves any actual intelligence. It is a powerful tool but a sledgehammer when a small mallet might do, all the better to pound all those round pegs into square AI holes.

With margins like those above, one thing I feel certain about is that Nvidia’s dominance of the hardware side of the emerging AI field will not continue indefinitely. You don’t have to be an economist or finance whiz to figure out that margins like that will be attacked. Intel, Broadcom, and Qualcomm, among others, are not run by dumb people and they will catch up; the question is when not if. But right now, Nvidia is almost the only game in town and they are enjoying their temporary monopoly to the fullest. I sure wouldn’t be looking to short the thing even though I’ve been doing this long enough to know that vertical moves like we’ve seen in Nvidia’s stock are not sustainable; there will be a large correction at some point even if they maintain their dominance for a while longer. And look out if – when – those fat margins start fading.

Nvidia’s stock is not cheap of course, trading at 95 times trailing earnings, 90 times cash flow, and roughly (very roughly) 40 times next year’s guess at earnings. Despite that, I would not, as so many have in recent articles, put Nvidia’s rise in the same category as the dot com boom of the late 90s. Nvidia’s stock is expensive but it isn’t late 90s Sun Microsystems or Cisco expensive. And it shouldn’t even be mentioned in the same breath as a lot of the junk dot com stocks from back then that were trading based on nothing but hopes and prayers because that’s all they really ever had. Nvidia is a real company, with real revenues and fat margins that got really, really lucky that their gaming chips turned out to be perfect for AI. Did they plan it? I can’t say for sure but they were talking about AI in quarterly conference calls in 2022 so they weren’t ignorant of the possibilities. Did they expect this? I don’t think so but I don’t know. And congratulations to any investor in Nvidia who held their positions despite a nearly 70% drop in the stock price from late 2021 to late 2022. If you did that you were either on an extended vacation, stubborn to the point of obstinance, or blessed with second sight.

What concerns me more are the other stocks in the AI orbit that don’t have anything unique like Nvidia and whose stocks have also gone vertical. Companies like Super Micro Computer which makes servers and is growing pretty rapidly. SMCI’s stock, which was around $250 just last August, has been on a moon shot, rising to over $1000 in mid-February. Unlike NVDA, SMCI already has considerable competition, and its margins, in the mid to high teens, reflect that. It was a good buy at a teens P/E when we bought it but the current price is completely disconnected from its actual reality. And that doesn’t even touch on the various problems that have kept the stock cheap until just recently (see here for some background). If you’re looking for reasonably priced growth stocks you often have to ignore a few warts and we did. But we couldn’t ignore valuations this absurd.

SMCI isn’t the only stock being affected by AI mania. Fabrinet (FN), another stock we have owned for nearly two years, has also been tagged as “an AI” stock by some. It’s a company that operates complex manufacturing facilities for OEMs, primarily in the optical communications segment. It was founded in 2000 by one of the co-founders of Seagate Technology and has enjoyed steady growth over a number of years. It is typical of the kind of company we look for, with limited competition in a growth market (17% annualized revenue growth over the last 3 years), reasonable and sustainable margins (low to mid-teens gross margins), good growth (30% annualized operating income growth over the last three years) and a pristine balance sheet (no debt). It was first mentioned as an AI play after Q1 24 earnings were released in November 23 and the stock rose about 40% before a recent pullback. Any connection to AI is tangential at best but that doesn’t matter in a market like this.

We haven’t sold FN because the stock is still fairly reasonably priced and we are actually hoping to buy more on a pullback. We are investors and try to hold things for years rather than weeks or months. But when circumstances hand you years of returns in a few months, as happened with SMCI, you have to take what the market gives. We didn’t catch the top on SMCI but you rarely do in these situations. We’re happy to take our gains and look for something else. There are plenty of areas of the market that aren’t acting crazy right now and offer good value for investor’s dollars.

As an example, I saw an article last week showing that Nvidia’s market cap is greater than the entire US energy sector despite the fact that the energy sector’s net income was $147 billion versus just $19 billion for Nvidia. Unlike companies like SMCI, which announced a new convertible bond last week that will dilute shareholders, the energy companies are busy buying back stock and raising dividends – at a time when oil prices are not outrageous at roughly $80/barrel and, as I pointed out last week, appear poised to rise. The energy sector is less than 4% of the S&P 500 but will contribute nearly 7% of the index’s earnings. Technology, meanwhile is 30% of the index but will contribute just about 23% of the index’s earnings. The last time we saw such a disparity was at the peak of the late 90s tech boom and the reason for it seems obvious. Technology sector earnings are expected to grow at nearly 17%/year over the next five years while energy’s are expected to grow at 3%.

Of course, that assumes the analysts who pull those growth rate guesses out of their nether regions have a clue what they are talking about. They had high hopes in 2000 as well and yet energy stocks outperformed technology stocks over the next five years +45.5% to -59.7%, a spread of 105.2%. If you extend that period to the peak in crude oil prices in the summer of 2008, the spread goes to 269.7% to -55.2%, a historic miscalculation of about 325%. History does not look kindly on Wall Street’s soothsayers.

Another area that continues to look attractive is the small and mid-cap parts of the market, which are considerably cheaper than large-cap stocks. Small and midcaps are more domestically oriented and should then benefit from an environment where the US economy is outperforming the rest of the world – as it is now. An environment of positive US growth, especially relative to the rest of the world, should be one where the dollar and interest rates remain firm and they are. Since 1971, in years that interest rates and the dollar both rose, small and mid-cap stocks outperformed large caps by 2.5% to 3% per year (depending on what indexes you use). While the dollar and rates aren’t rising strongly right now, both are in intermediate to long-term uptrends.

Another group that performs well in that environment is value stocks, large and small. Since 1971, in years where the dollar rose, small-cap value stocks produced double the return of years when the dollar fell (18.5% vs 9%). Large-cap value stocks also outperform in a strong dollar environment (14.2% vs 9.8%).

Technological breakthroughs take time to impact productivity and economic growth. Oftentimes we see markets impacted first, a sector or market takes off in anticipation of the impact of some big change. When reality inevitably comes up short of the hype, markets, as they say, adjust. We saw it in the early 90s in biotech when everything with Bio in its name went vertical, only for most of the companies to disappoint. We got some great companies out of that boom – Amgen, Genentech, etc. – but a lot of them never fulfilled their promise and ultimately the sector crashed. We saw the same thing with internet companies in the late 90s. The current AI boom seems likely to follow a similar path of boom on hope and bust on reality. It is after the bust that we’ll find out which companies are going to really reap the benefits long term.

Amazon offers a lesson from the last big tech boom and bust. An investor who bought Amazon at its IPO in May of 1997 made a lot of money to its top in December 1999 (about 7500%) but only if he sold. The stock fell 94% from December 10, 1999 to September 28, 2001. Few people could stomach that but if you did the real benefit came after the bust; the stock is up 58,000% since that 2001 low. Bust survivors are robust.

The AI boom has pushed the stock market into one of its periodic flights of fancy, when the future seems certain and imminent. It isn’t of course because it never is but that won’t keep the gullible from buying into the frenzy for a while longer. The great thing about AI, according to the hype, is that while companies like Nvidia benefit first, all companies will benefit in the end from its application. AI is like a technological snake oil that will cure anything from low productivity to labor shortages. Yeah, probably not but it’s fun to dream. Sobering up before the party really gets going might make you a party pooper but it also means no hangover. Please put down the lampshade."

MY COMMENT

YES....NVDA is a very dangerous stock.....if you get carried away and are not truly long term. At some time it will come back to reality.....the question is when and how many years into the future. The key will be the management at NVDA and their ability to see the future and keep ahead of everyone else.

Unfortunately....the future is opaque.

 

GREAT....I love it. Good news for the bull market and stocks. Also good for the FED and rate cuts.

Consumer confidence declines for first time since November

https://finance.yahoo.com/news/cons...-for-first-time-since-november-155701880.html

MORE....good news today:

Led by Drop in Transportation, Durable Goods Orders Fall in January

https://www.investopedia.com/us-economy-news-today-february-27-8600820

 

A DULL, BORING, LAZY, LISTLESS, market today. the way we are going....this may also end up being the message for the entire week. PCE on Thursday is being hyped and fear mongered......time will tell if anyone really cares.

 

My account is now making an attempt to go GREEN for the day....with....HD, PLTR, NVDA, and GOOGL....currently on the positive side. The close today is TOTALLY up for grabs.....not that I care with where I am sitting YTD.....and with my long term focus.

 

I agree Zukodany....if half the population....or more.....the great silent majority.....can not trust the GOOGLE AI product....and by extension GOOGLE search itself....they are in big trouble. Management needs to wake up and nip this CRAP in the bud.

There are plenty of other AI options....about half the options from an article that I saw a few days ago......that do bring back accurate search results and information.

 

WELL....a tiny loss for me today.. I had four stocks down and fours UP today. The UP stocks were.....PLTR, HD, GOOGL, and AAPL. I lost out to the SP500 by 0.20% today.

Not a great week so far....but far from bad at the same time. I am pretty much treading water in terms of my loss this week.

 

The POOR open today. No rational reason for this....other than speculative short term trading happening based on news headlines, the PCE report tomorrow and Bitcoin......which I see as totally irrelevant to the stock markets.

Stock market today: US stocks slip in cautious countdown to PCE print as Bitcoin soars past $60,000

https://finance.yahoo.com/news/stoc...nt-as-bitcoin-soars-past-60000-122739155.html

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

"US stocks retreated on Wednesday, coming off a mixed close as caution prevailed ahead of a crucial inflation report that will guide expectations for interest rate cuts.

The Dow Jones Industrial Average (^DJI) and the Nasdaq Composite (^IXIC) were down more than 0.5% meanwhile the S&P 500 (^GSPC) sagged 0.3%.

Stocks have struggled in February's final days as fresh economic data helped bring a market boosted by AI euphoria back to the reality of higher-for-longer interest rates. Investors have spent this week counting down to the PCE inflation reading on Thursday, seen as key in determining how quickly the Federal Reserve will start making rate cuts.

In the meantime, a report on fourth quarter GDP is on the docket Wednesday, along with readings on mortgage applications and personal consumption.

In other asset markets, bitcoin (BTC-USD) continued its roaring rally, breaking above $60,000 early Wednesday to come within striking distance of a fresh all-time high. The arrival of spot bitcoin ETFs have helped the cryptocurrency reach levels not seen since late 2021.

Among big movers, shares of Beyond Meat (BYND) soared over 60% in morning trading after the plant-based meat company's CEO promised to slash costs in a turnaround bid."

MY COMMENT

I see no rational relationship between stocks and bitcoin. In fact I see no rational relationship between the price of bitcoin and anything. I dont think it reflects the economy or anything else other than pure speculation. it is basically an asset that is connected to NOTHING......a "Seinfeld" asset.......and indicates NOTHING....other than trading in bitcoin itself by hard core believers and speculators and professional traders..

As to PCE and the current fear mongering.....yes.....this too shall pass.....very quickly.

 

This is actually good news for investors and the bull market. BUT.....hey....who cares.

US economy grew solid 3.2% in fourth quarter, a slight downgrade from government’s initial estimate

https://apnews.com/article/economy-...unemployment-22f096fe881d4a48314c67d6f4cc67ba

"WASHINGTON (AP) — The U.S. economy grew at a robust 3.2% annual pace from October through December, propelled by healthy consumer spending, the Commerce Department reported Wednesday in a slight downgrade from its initial estimate.

The expansion in the nation’s gross domestic product — the economy’s total output of goods and services — slipped from a red-hot 4.9% from July through September. The fourth-quarter GDP numbers were revised down from the 3.3% pace Commerce initially reported last month. U.S. growth has now topped 2% for six straight quarters, defying fears that high interest rates would tip the world’s largest economy into a recession.

Far from stumbling, the economy grew 2.5% for all of 2023, topping the 1.9% growth in 2022...........

Wednesday’s report also showed inflation pressures continuing to ease."

See article for more.

MY COMMENT

GDP is right there in a .....sweet spot......for the economy. It is slightly moderating and showing NO indication of an uptick in inflation. AND......YES......there is and will be NO recession.

 

The obvious power of long term investing.

401(k) millionaire ranks grew 11.5% in 2023. They are ‘poster children for staying the course,’ expert says

https://www.cnbc.com/2024/02/27/401...rage-balances-rose-in-2023-fidelity-says.html

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

"Key Points

• Retirement 401(k) account balances bounced back in 2023 to the highest level in nearly two years, according to Fidelity’s recent report.
• Despite persistent inflation, more than one-third of workers increased their retirement savings contribution rate.
• The number of 401(k) millionaires also rose more than 10%.

In a year that defied most economists’ expectations, retirement savers reaped the benefits.

Retirement account balances, which took a sharp nosedive in 2022 due to market volatility, have now started to bounce back, according to the latest data from Fidelity Investments, the nation’s largest provider of 401(k) savings plans. The financial services firm handles more than 45 million retirement accounts total.

The average 401(k) balance ended 2023 up 14% from a year earlier to $118,600, Fidelity found.

The average individual retirement account balance also gained 12% year over year to $116,600 in the fourth quarter of 2023.

“This past year ended on a high note for retirement savers,” said Sharon Brovelli, president of workplace investing at Fidelity Investments.

Positive savings behaviors were key to realizing better outcomes, added Mike Shamrell, Fidelity’s vice president of thought leadership.

A great year for the major indexes also helped. The Nasdaq soared 43% in 2023, while the S&P 500 notched a 24% annual gain and the Dow Jones Industrial Average rose more than 13%.

Number of 401(k) millionaires jumps 11.5%

At the end of 2023, signs that inflation was cooling were not only good news for the economy, but they were also good news for stocks. After the S&P 500 closed out 2023 with a nine-week win streak, the number of Fidelity 401(k) plans with a balance of $1 million or more increased 20% from the third quarter.

Year over year, the number of 401(k) millionaires rose 11.5%.

“These are the poster children of staying the course and taking a long-term approach,” Shamrell said.

Overall, more than one-third of retirement savers increased their retirement savings contributions, Fidelity found. The average 401(k) contribution rate, including employer and employee contributions, now stands at 13.9%, just below Fidelity’s suggested savings rate of 15%.

More retirement savers are borrowing from their 401(k)

Still, savers also tapped their accounts to free up cash. The percentage of workers who took a loan from their 401(k), including for hardship reasons, ticked up to 8.9%, from 7.8% at the end of 2022.

Federal law allows workers to borrow up to 50% of their account balance, or $50,000, whichever is less. However many financial experts similarly advise against tapping a 401(k) before exhausting all other alternatives since you’ll also be forfeiting the power of compound interest.

At the same time, many households are also leaning heavily on credit cards to make ends meet, other research shows.

Across all ages and income levels, more than one-third of adults have more credit card debt than emergency savings, according to a recent report by Bankrate.

“At a time of record-high credit card rates, we see a record-high number of Americans carrying credit card debt that exceeds their emergency savings,” said Greg McBride, chief financial analyst at Bankrate.

During times of financial stress, it may make sense to borrow from a retirement account, rather than rely on such high-interest debt, according to Fidelity’s Shamrell.

“If you have been in a financial bind and the choice is a high-interest credit card or a loan from your 401(k), sometimes the loan is your optimal choice,” he said.

“But that’s in a time of real financial need,” he added, “not going to your college roommate’s wedding in Napa.”

Unlike credit card and other debt, savers who borrow from their 401(k) pay themselves back with interest. Interest rates are also generally much lower than those of credit cards, which are currently at a record high over 21%."

MY COMMENT

The guts of the markets......the IRA and 401K account holders. The great silent majority of investors. The ultimate long term investors....basically for life till retirement. AND.....many if not most of these investors.....are at least partly in passive Index funds and ETF's

 

This constant daily coverage of Bitcoin is simply DUMB.

We dont cover the US dollar in minute detail every day. We dont cover all the bonds and treasuries in minute detail every day. We dont cover all the other commodities and financial instruments in detail every day.

The percentage of the population that owns Bitcoin is extremely small. This coverage is simply........extreme.....and sensationalism.

BUT....it is not going to change. It will be mixed in with the actual markets that over the longer term reflect fundamental data of the companies that are included.......contrary to Bitcoin.

 

The markets today......who cares. On one hand we have all the breathless daily coverage of what is going on in the markets today and all the experts giving opinions of the cause.

On the other hand.....I prefer the old time explanation.....we are taking a few days to a week for the markets to consolidate the recent gains and the hot start to the year. A perfectly normal market action.

This is rational and expected. it is NORMAL and actually a good thing. We dont want to see markets going straight up with no weekly variation or pull-backs. That would indicate IRRATIONAL EXUBERANCE.

So I am content to sit fully invested....and do NOTHING.

 

I think this little article is pretty good on the current Bitcoin rally. Basically people that think bitcoin is an investment chasing the recent gains.

Bitcoin surges to top $60,000, putting it within striking distance of all-time high

https://finance.yahoo.com/news/bitc...king-distance-of-all-time-high-134020358.html

MY COMMENT

The Bitcoin ETF's are on fire. Trading is on fire. Trading volumes are surging.....and at the same time......."Derivatives traders are also now piling into the bitcoin rally".

NOT....something I have any interest in.

 

WELL....right now I have only 2 stocks in the green. The two non-tech anchors in my portfolio.....HD and COST.