W, I was going through some of the posts and kept thinking about this ratio between institutional and retail share in the market. If 98% of all trades are institutional, how the retail can have any significant impact on markets today?
Well....because that quote is talking about ".......institutional high speed machine trading". I constantly complain about it totally distorting the day to day short term markets with......AI Program Trading of news headlines. The little retail investors ......are the guts of the long term markets and dominate long term investing. One is "trading"......one is "investing". The nearly total focus of the financial media on the short term "speed traders"......usually ignores the real guts of the markets....the ACTUAL "investors".....the little long term retail "investors". These speed traders are NOT the markets.....they are simply momentum trading faster than a person can hit a button......in and out in micro-seconds. AND.....the momentum they are trading.....is created by.......you guessed it....their own trading. The real investors.....the little people.....own the markets either directly or though Index investing.......and are TOTALLY responsible for the long term results shown in a multi year chart of the NASDAQ, the DOW, and the SP500. That is what I mean........"WE"....are the REAL markets......not some BRAINLESS computer trading news headlines.... in and out faster than a sewing machine needle going up and down. And....."WE"....are the ones capturing and COMPOUNDING those long term gains....which come from actual business fundamentals over the longer term.......something high frequency speed traders do NOT get. "WE"......are the ones reinvesting capital gains and dividends......not them. So yes......"WE"....are the disrespected, ignored,......guts of the markets.
A good question.....Strathmore. Glad you asked it. I would also say our impact is NOT in the "trading"......but the "holding" of our stocks which serves to anchor the markets from the distortions and disruptions of activity like "speed trading" which has no real connection to business fundamentals or individual business.
AND.....I would say the markets will no longer exist....when the percentage of long term buy and hold..... little retail investors........ is reduced to a minimal number of people. At that point....what we now consider the stock markets will be gone. At that point the, "so-called" markets will simply be....nothing but....speed trading with no rational relationship to business fundamentals. Actual business fundamentals will no longer anchor the markets. Unfortunately that is where I see us rushing headlong. I dont believe this will happen in my lifetime....but perhaps over the next 50 years, minimum. And to speculate further.....I can see the totally disruptive impact on business of this sort of trading.......basically forcing ALL business to be "private" and not publicly traded. Why in the world would any business.....or their shareholders..... want to be completely and constantly jerked around in markets that are totally dominated by daily speed trading. DISCUSSION anyone??????
Perhaps there will be separate markets. One for speed trading and other speculative trading....basically gambling. And another one where that sort of trading is BANNED and people are investing in businesses for the long term. Perhaps the long term market will have limitations on how long you have to hold before selling.
Ok the insanity is over for the day. AND....I ended in the GREEN....with only two stocks up today....NVDA and PLTR. I also BEAT the SP500 by 0.87% today. Very strange, but I will take it. Moving on to Friday....TGIF....TGIF.
OK....typical. A Revenue and Earnings BEAT......but the stock is down, after hours, on......yes, same as usual.....guidance. In other words down on fantasy, projection, numbers that have not happened yet Netflix stock falls as revenue guidance disappoints https://finance.yahoo.com/news/netflix-stock-falls-as-revenue-guidance-disappoints-200638900.html Netflix beats estimates as ad-supported memberships rise 34% https://www.cnbc.com/2024/07/18/netflix-nflx-earnings-q2-2024.html
The story-line on the NVDA gain today. Nvidia rebounds after TSMC says AI chip demand remains strong https://www.cnbc.com/2024/07/18/nvidia-rebounds-after-tsmc-says-ai-chip-demand-remains-strong.html "Key Points Nvidia shares rose nearly 3% on Thursday, one day after the semiconductor sector’s worst performance since 2020. Nvidia’s rally comes after TSMC said on Thursday that demand remains high and supply remains constrained for high-end AI chips, which TSMC manufactures for Nvidia." MY COMMENT DUH. Thank you Captain Obvious.
Some things to keep in mind. Will the Stock Market Crash in 2024? 6 Risk Factors With the U.S. presidential election looming, some investors are wary of potential volatility. https://money.usnews.com/investing/articles/will-the-stock-market-crash-risk-factors (BOLD is my opinion OR what I consider important content) "Even with company earnings on the upswing and Wall Street buzzing about the Federal Reserve curbing interest rates, some stock market investors are still on edge. On the plus side, the S&P 500 is up 18.8% year to date through July 16, an encouraging number at the halfway point of 2024. The index is also up 7.4% since the beginning of June, reducing any talk about a summer swoon for stocks. The 2024 presidential election is also in full swing, as President Joe Biden's nomination hangs in the balance and Republican nominee and former President Donald Trump prepares to address party convention-goers after surviving an assassination attempt. Historically, presidential election years have delivered robust returns for stock investors, with some credence to the notion that elected officials don't want to upset Americans headed to the voting booth. They tend to set short-term economic policy accordingly. But if recent events are any indication, this is clearly not just any old election year. Additionally, COVID-19 has faded, taking with it pandemic-related supply chain shortages and business closures, which is all good news for a bull market that launched in October 2022. Yet consumers remain concerned about high product and service prices and a frozen U.S. real estate market, as well as endless (and expensive) wars in Ukraine and the Middle East, sky-high government spending and a lukewarm job market. Throw all those issues into the pot, and you have a market that wants and expects to move forward when key economic indicators turn upward for the long haul. If they take a turn for the worse, the end of 2024 could bring toxic news to market watchers nervous about an economic collapse. "The state of the U.S. stock market in 2024 presents a mixed picture," says Nicholas Scibilia, founder and CEO at Orbit, an investor social platform based in New York. "One way to view the current state is that the market has shown resilience and growth, driven by strong earnings, technological industry disruptors like AI and increased consumer spending." On the flip side, Scibilia cites "general concerns" about staggeringly high valuations, rising geopolitical tensions and looming potential regulatory changes. "Additionally, market volatility can be influenced by fluctuating energy prices and economic policy, which is still uncertain," he adds. "Overall, the market has demonstrated great recovery and growth so far this year, but there are still many looming questions that have yet to show a clear direction toward an answer." 6 Market Risk Factors for 2024 With the market poised to react to several catalysts, what are the biggest risks keeping investors up at night? These six issues certainly qualify: The employment picture. Inflation and consumer confidence. Geopolitical risks. Short-term market volatility. The Fed's response. Investor jitters. The Employment Picture The stock market is always forward-looking, says Gianmaria Feleppa, market expert and CEO of Milan, Italy-based UCapital Fintech Group. "If it thinks the economy is moving in a bad direction, stocks will sell off," he says. That likely won't happen if companies are hiring and the U.S. unemployment rate stabilizes between about 3.5% and 4%, as it has since late 2021. In June 2024, the unemployment rate ticked up to 4.1% but changed little from the previous month. The jobless rate was notably lower a year earlier, however, at 3.6%. "Companies are producing and making profits, consumers are continuing to buy, people are going on vacations, things are pretty good," Feleppa notes. "Jobs are important because stable employment means people have money to pay their bills and buy nonessential items, such as vacations, new cars and new clothes, which moves the economy." That makes underemployment a valid concern, Feleppa says. The unemployment rate has increased from its 50-year low last year, but it's not enough to cause the Fed to cut interest rates. "It's always an important issue since labor-market resilience drives consumer spending and underpins the economy," he adds. Inflation and Consumer Confidence Consumer purchases are the largest contributor to U.S. economic growth, making up about 70% of gross domestic product, or GDP. "This means the economy hinges on consumer confidence and sentiment," Feleppa says. "The Conference Board's most recent consumer confidence report came in with signs of stability, which is good. However, it's slightly lower than May's figures amid worries about the economic outlook." Still, consumers remain upbeat about the labor market and expect inflation to fall. Meanwhile, the report showed consumers feel a recession is less likely over the next 12 months, while "consumers' assessment of their family's financial situation, both currently and over the next six months, was less positive," according to the Conference Board. Pretty much every key economic indicator, including consumer confidence, is impacted by inflation. "Inflation is important because it hurts consumers' spending power," Feleppa says. "Inflation has been sticky, but has come down dramatically since last year. And while it's still above the Fed's target, it's a much better inflation rate than the rest of the world." However, there's no guarantee that inflation will subside. The U.S. inflation rate bounced back up after November 2023 before settling at 3% in June 2024, as measured by the consumer price index. "Persistent inflation can significantly slow down purchasing power and lead to higher interest rates, which ultimately dampens economic growth and reduces corporate profitability, something we have seen firsthand since 2021," Scibilia says. Geopolitical Risks Along with stubbornly high inflation and rising consumer prices, dangerous geopolitics may be the biggest market breaker in the second half of 2024. "The conflicts in Eastern Europe and the Middle East are pretty serious compared with recent history," says David Russell, global head of market strategy at TradeStation in Chicago. "There's no direct impact on stocks, but escalation could rattle nerves." Overshadowed by the Ukraine and Middle East conflicts, a potentially damaging geopolitical risk is the conflict between China and Taiwan. "There's been some rumbling, but thankfully it's not significant," Russell notes. Short-Term Market Volatility Historically, the third quarter has been the worst-performing quarter for stocks, and the chance of a market slide this year is a topic of discussion. "That's especially the case with the uncertainty of the upcoming November elections," says Rod Skyles, blogger and market analyst at The Unconventional Economist. "Still, there's little doubt this historic market run has met its limit." Once the top-performing few stocks from the S&P 500, especially Nvidia Corp. (ticker: NVDA), are taken out of the equation, the U.S. stock market "has significantly underperformed" the index, and nearly 40% of the 500 stocks in the index are down year to date in 2024, Skyles says. "For shorter-term investors, some profit-taking may be in order in this market, while longer-term investors should know it's difficult to time the market, even as the market momentum is still upward," Skyles adds. "That could change quickly, but unless one is risk-averse, having some patience to see how things play out might be the best current course for most investors." The Fed's Response Another big risk in the second half of 2024 is that market participants continue to underestimate the resolve of the Fed to tame inflation decisively. "Investors underestimate the Fed's resolve because they are too focused on the monthly inflation and labor numbers while ignoring the more important financial history guiding the Federal Reserve's hand," says Mark J. Higgins, senior vice president at Index Fund Advisors in Portland, Oregon. "One of the gravest errors in the Federal Reserve's history was failing to maintain tight monetary policy and nip inflation in the bud in the late 1960s and 1970s." Each time the Fed loosened monetary policy too soon, it weakened its credibility and allowed increasingly high inflation expectations to become entrenched in the economy. "This is why Paul Volcker was forced to raise the federal funds rate to more than 20% to end the Great Inflation from 1979 to 1981," Higgins says. "In 2024, the Federal Reserve is unlikely to repeat this mistake if only because many FOMC members, including Chair Jerome Powell, remember the costly consequences." The stock market still miscalculates the Fed's determination to maintain its hawkish position. "That creates conditions modestly more conducive to a financial panic," Higgins adds. "Moreover, there is precedent from periods similar to the one we are in that suggest a soft landing is less likely than a hard one." Investor Jitters If the economy starts to look shaky, investors may hurt their own cause by rushing to the exits. Then, when the storm has quickly passed, those same investors may try to get back into the market by any means necessary, and at any price. That's called trying to time the market, a strategy that usually makes things worse, portfolio-wise. "Timing the market can be difficult, and the biggest mistake would be attempting to hit a high or low point in the market to sell or buy stocks," Skyles says. "It's okay to look for trends, but timing the market isn't advisable unless you're a market professional that buys and sells stocks daily." Other market experts advise spending more time in the market rather than trying to time it. "Time in the market drives long-run returns versus timing the market," says Steve Lowe, chief investment strategist at Minneapolis-based Thrivent. "Historically, missing just a handful of market days each year can significantly depress returns, such as being out of the market as stocks rally sharply and quickly from a market low point." One stock market barometer Lowe likes is company earnings. "The strength of the U.S. stock market in this economic cycle has been driven predominantly by impressive earnings growth from a few mega-cap technology stocks. Should these stocks stumble, the market rally could falter," he says. "A continued healthy market depends on a broadening of earnings growth into other sectors." What to Do if You Have Extra Money to Invest Right Now If you have additional capital and are hesitant to put it to work in the stock market, investment gurus say that's understandable, but it's also a missed opportunity. "You should always use academic investing principles and eliminate speculating and gambling," says Mark Matson, founder of the investment advisory firm Matson Money and the author of the book "Experiencing the American Dream: How to Invest Your Time, Energy and Money to Create an Extraordinary Life." First, decide how much equity exposure you can handle and what your time horizon is, Matson says. "Typically, the longer you have, the more aggressive you can be, then diversify as much as possible," he says. "Look at structured investment funds, which can help investors capture dimensions of return they may not normally get in a typical index fund." Also, work with a trusted investment advisor before making any big decisions, he adds. "Investors will always be tempted to sell when things look bleak and buy when the market is high. Fear often rules the day," Matson says. "Fear of losing money and fear of missing out can be destructive." "We are living in an extraordinary time, and there is much chaos for investors to navigate," he says. "The fear of war alone can destroy investors' peace of mind, so a coach can help you stay disciplined when all else fails."" MY COMMENT The above is a pretty good list of the BIG....GENERIC....events and concerns that could impact the markets. Of course I prefer to focus on two things.....earnings.......and....the specific companies that I own. At this point I am not really concerned about much of the above. BUT....being aware of potential issues is a good way to insulate yourself from rash decisions if something like the above happens. Being aware lessens the potential for going along with panic......if some macro-event happens.
I like this little article. Disinflation’s Implications What slowing inflation means for markets. https://www.fisherinvestments.com/en-us/insights/market-commentary/disinflations-implications (BOLD is my opinion OR what I consider important content) "The US consumer price index (CPI) fell -0.1% m/m in June, its first monthly decline in four years, drawing heaps of headlines—and immediate speculation on what this means for Fed policy, the economy and stocks. While inflation’s continued cooling is welcome, we think this is old news for markets, which spied disinflationary trends long ago. Driving the headline decline: gasoline prices’ -3.8% m/m drop, helped by used cars (-1.5%) and air fares (-5.0%).[ii] More broadly, goods prices have flipped negative recently while services prices are generally decelerating. Exhibit 1 shows goods prices fell -0.4% m/m for a second straight month and have seesawed for over a year after the historically unusual, consistent (and sharp) climb during 2021 – 2022’s supply chain chaos. But most striking to us: services inflation’s slide from 0.7% m/m at 2024’s start to 0.1% midyear. Exhibit 1: Monthly Goods and Services CPI Swings Back to Prepandemic Norms Source: FactSet, as of 7/11/2024. Many blame continually rising services prices for stubbornly high inflation, but the trend all year has cut against the popular narrative when we look at the data on a monthly basis. Conventional wisdom claims services make a better gauge of underlying inflation than goods because they cover the lion’s share of economic activity, and services prices tend to be steadier. Fair enough. But 42% of services prices consist of owners’ equivalent rents (OER), a hypothetical figure estimating what homeowners would pay to rent their own homes.[iii] No one pays this, and its inclusion is questionable logically, considering homes are an investment and payments don’t fluctuate month-to-month. Imaginary prices may be “stickier,” but that doesn’t make them a truer measure of inflation. Now, services excluding shelter (mostly OER) accelerated from 3.0% y/y last October to 5.0% in May, before easing somewhat to June’s 4.8%.[iv] But that doesn’t mean the inflationary beast got back out of the cage. It stems primarily from early-year increases in transportation services and medical care costs. Both have since eased, and they represent industry quirks more than a broad phenomenon of too much money chasing too few goods and services. Note, too, that while services prices are less sensitive to supply factors, this portion of CPI isn’t inherently more real or meaningful than falling goods prices, which have largely offset rising services’ (ex. shelter). There will always be sections of the consumer basket that are rising or falling. What matters—for the prices people pay and for inflation across the broad economy—is how those moving parts come together as a whole. To see how these monthly moves translate to overall improvement in CPI’s annual rates, ex. shelter, see Exhibit 2. Headline CPI decelerated to 3.0% y/y from May’s 3.3%, while core CPI (excluding food and energy) ticked down to 3.3%, its slowest since April 2021.[v] But we think that gives a skewed version of inflation given the biggest force propping CPI up in June was shelter, which rose 5.2% y/y. These prices combine actual rent payments and OER. Strip this out and you see something stark: Excluding shelter, CPI rose just 1.8% y/y in June. Exhibit 2: CPI Ex. Shelter Below 2%—and Shelter Trending Down Source: FactSet, as of 7/11/2024. Meanwhile, there is likely more headline (and core) CPI slowing ahead. OER tends to lag actual home prices by around 15 months. This means further deceleration is likely baked in from housing costs’ slight year-over-year dip negative last year. Inflation’s reality has long been better than perceived. CPI inflation excluding largely made-up shelter costs has mostly been below 2% since June 2023. While some only see this now, markets did so long ago. Inflation’s 2022 spike contributed to that year’s bear market (fundamentally driven decline exceeding -20%), but the bull market that began October 2022 occurred with CPI still rising around 8% y/y—when headlines were frightful. We think forward-looking stocks in part pre-priced the improvement and gradually easing fear that was to come, which we are seeing today. Now, most chatter surrounding June’s inflation report focuses on its prospects for Fed rate cuts. Markets are pricing in a series of quarter point reductions starting September. But don’t overrate rates, as they don’t drive stocks. To see this, consider: Rate cut expectations have been all over the place this year, ranging from five to seven as the most likely scenario in Q1 to just one to two cuts now. Yet stocks have been relatively calm amid this year’s strong first half regardless. Maybe cuts provide some aid for rate-sensitive areas like real estate, but the broader market doesn’t seem to hinge on them. Inflation has been a major economic and financial story for almost three years now and its return to normal is a nice development. But this isn’t surprising to markets, which lead, anticipating economic developments well in advance of headlines." MY COMMENT Inflation is now going to be "old news". As a market issue it has been beaten to death. What I always fear more than inflation is.....DEFLATION. I do not see deflation happening right now.......but when or if it happens it will be a much more significant issue for the economy and investors.
The largest outage in history.....weird. Unprecedented IT Outage Cripples Businesses Around the Globe https://finance.yahoo.com/news/lse-joins-banks-airlines-flood-072115559.html
So true. The rout in tech stocks is a 'golden buying opportunity' for investors, analyst says https://finance.yahoo.com/news/rout-tech-stocks-golden-buying-023602333.html (BOLD is my opinion OR what I consider important content) "The sell-off in technology stocks represents a "golden buying opportunity" for investors, according to Wedbush analyst Dan Ives. The recent sell-off was partly sparked by former President Donald Trump's hawkish comments on Taiwan and the potential for more tariffs in an interview with Bloomberg Businessweek. "They did take about 100% of our chip business. I think Taiwan should pay us for defense. You know, we're no different than an insurance company. Taiwan doesn't give us anything. Taiwan is 9,500 miles away. It's 68 miles away from China," Trump said. "Taiwan took our chip business from us, I mean, how stupid are we? They took all of our chip business. They're immensely wealthy. And I don't think we're any different from an insurance policy. Why? Why are we doing this?" Trump asked. With polls and betting markets recently moving in Trump's favor for the November election, investors took Trump's comments seriously, with the Nasdaq 100 falling more than 3% since the interview was released. Chip stalwarts also sold off on reports that President Joe Biden's administration was readying a fresh round of restrictions on trade with China to limit its access to cutting-edge tech. But Ives said Trump's rhetoric can represent more bark than bite, and that the latest tech sell-off ultimately represents a great buying opportunity for long-term investors. "This is all a game of high stakes poker for the Trump campaign and a shot across the bow against XI/Beijing," Ives wrote. "We believe the 'Trump trade' does not ruin the AI Revolution thesis and tech bull market and to some extent it's just a negotiation that will be a long and drawn out process." Semiconductor production won't be moving to the US in a significant way anytime soon — Taiwan produces about 92% of the world's advanced microchip supply. And with the global economy dependent on the silicon wafers that come out of Taiwan, it's not in the US' best interest to disrupt that by letting China take it over. Principal Asset Management's Todd Jablonski said this tech sell-off is simply a small blip in the grand scheme of things. "A possible Trump administration doesn't disrupt the forward momentum of big tech in the U.S. These types of market blips are common as we approach elections, and investors should be cautious in making moves based on these fluctuations," Jablonski said in a note on Thursday. What ultimately matters most for the price of tech stocks over the long-term is earnings, and that area is still a bright spot, according to Ives. "Our playbook continues to be own the AI Revolution thesis and winners on sell-offs like yesterday. We believe 2Q earnings will be a major positive catalyst for the tech sector and expect tech stocks to be up another 15% for the year adding to the robust tech gains in 1H2024 as now the broader tech growth story takes center stage," Ives said." MY COMMENT Of course I agree......DUH....since I own all the big cap tech stocks except for META. This seems stunningly obvious to me as a long term investor.
To continue the above on a more micro level....one company. Investors can expect a huge reveal on Nvidia's upcoming earnings call that could silence AI critics, Goldman Sachs says https://finance.yahoo.com/news/investors-expect-huge-reveal-nvidias-233924448.html (BOLD is my opinion OR what I consider important content) "Nvidia is set to silence AI critics when it announces its second-quarter earnings results in late August. That's according to a Monday note from Goldman Sachs, which details takeaways from a recent meeting with Nvidia's chief financial officer, Colette Kress. There are growing worries that for all the hundreds of billions of dollars being spent on Nvidia's AI chips, there's little to show from it in the form of profits and revenue for Nvidia's customers. "End-user companies and their investors will soon look for revenue to justify the $500 billion already spent," Bank of America said in a note earlier this week. "No one denies the computing power. But after one last frenzied rally around the latest chips, investors may come to doubt the near-term economics." But according to Goldman Sachs, Kress said Nvidia is planning to highlight the profits its end users are generating from the growing use of its AI-enabled GPU chips. "In order to assist investors in appreciating customers' ROI profiles, Ms. Kress noted that, similar to how they shared data from Meta on their most recent earnings call, they intend to provide ROI metrics from customers on its next earnings call as it aims to instill confidence in investors," Goldman Sachs said. On its latest earnings call, Nvidia said that for every $1 spent on its HGX H200 servers, an API provider serving Meta's Llama 3 tokens could generate $7 in revenue over four years. Other takeaways from Goldman's conversation with Kress include the expected revenue ramp of Nvidia's next-generation Blackwell GPU chips. Goldman expects revenue from the Blackwell chip to be limited in Nvidia's third quarter, "followed by a more significant ramp in FY4Q (January) and FY1Q (April)." "Ms. Kress also stated that inputs such as data center facility space, power, and cooling — all concerns often raised by investors as it pertains to customers' ability to build out large-scale data centers — are unlikely to derail the growth trajectory of the company for the foreseeable future," Goldman Sachs said. Overall, Goldman Sachs said it was confident Nvidia would deliver a positive earnings surprise leading to positive EPS revisions when it reports results next month. "We reiterate our Buy rating on NVDA as the meeting reinforced our belief in the sustainability of the ongoing Gen AI spending cycle as well as Nvidia's ability to maintaining its leadership position through consistent and rapid innovation across Compute, Networking and Software," Goldman Sachs said. The bank reiterated its $135 price target for Nvidia, which represents potential upside of 14% from current levels." MY COMMENT I own this stock and strongly agree with the above. BUT.....that does not mean that everyone should load up on NVDA. In fact there are probably many investors that should not own it at all......other than as part of the SP500. What really counts for each individual investor is NOT to blindly follow the herd. Do what is right for you and your particular situation.
Good news for the company and the economy in general. AmEx lifts 2024 profit forecast on robust spending by affluent customers https://www.cnbc.com/2024/07/19/american-express-axp-q2-earnings.html
I guess we now know that this was NOT a boycott. It was an instant market move against this particular product as a result of a marketing DISASTER. It was a huge consumer....broad based.....move and it is NOT going to unwind for a long time. A CLASSIC business school case study topic. Bud Light falls to No. 3 beer brand more than year after Dylan Mulvaney controversy Michelob Ultra tops Bud Light in sales, with Modelo Especial leading them both https://www.foxbusiness.com/economy...er-brand-more-year-dylan-mulvaney-controversy AND......a total failure in corporate crisis and PR management. BUD is still in denial in my view.
I see NOTHING new happening today to impact the markets. It will simply be the same market conditions we have faced all week......for better or worse. I am curious to see if stocks are able to rally back some today....or if the market weakness will continue. In either case I will....of course....simply do nothing.
92%...is wild. To me, this just seems like a glaring dumb move. We thought the little supply chain interruption back then was a pain to get through. I know there has been a push in recent times to change and get more independence in this area, but we don't see much about it anymore. Probably too many regulations and favors with money. We will learn the hard way at some point on this issue. Of course by then, everyone will be recognizing this problem way, way too late.
Yes......a disaster waiting to happen....when China chooses to take over 92% of the worlds chip production capacity. The event happening....would probably throw our economy into recession/depression for years.
A one week rotation last week? Wednesday and Thursday.....RUSSELL 2000 down....today....flat to down.
