Stay Calm And Don't Overreact: Nothing other than bonds are working on days like this. It might feel shocking, but let's remember that the S&P is only down about 6.5% from record highs. It's a pullback, the worst of the year. And yesterday's decline appears to be the worst single day decline since October 2022. But it's not even a correction yet, and while the economic growth data is potentially troubling, the 3 month rolling jobs growth is 170K. We're not in recession, and likely still won't. And that means the profit growth that analysts and companies expect is likely still coming. 2.1% growth according to the New York Fed, is hardly reason for alarm.
Talk about market disruption and distortion. Here is number two of three from this little story. "Short-term traders drove a global sell-off. According to Hatfield, short-term investors like hedge funds sold in droves over the past two days. He thinks they are hesitant to stay long on stocks now that earnings season is over. That said: “We think the chance of recession remains extraordinarily low,” Hatfield said, “and the sell-off is irrational.”" https://finance.yahoo.com/news/behind-stock-market-brutal-2-220511082.html NOT a big surprise.
Here is the latest on earnings to date: Key Data • Earnings: Seventy five percent of companies have now reported for Q2 2024. We are now at 78%positive EPS surprise. for REVENUE the figure is 59% of S&P 500 with a positive revenue surprise. • Earnings Growth: The earnings growth rate for the S&P 500 is 11.5%. On the way to the highest year-over-year earnings growth rate reported by the index since Q4 2021. • Guidance: 39 S&P 500 companies issued negative guidance, 35 S&P 500 companies issued positive EPS guidance. • Valuation: Forward 12-month P/E ratio, S&P 500, 20.7. Above the 5-year average and the 10-year average . MY COMMENT STILL looking good in spite of the short term and AI based traders hammering the markets.
Not good news for next week. Nvidia reportedly delays its next AI chip due to a design flaw / The company’s next big AI chip may not ship in large numbers until next year, reports The Information. https://www.theverge.com/2024/8/3/2...on-google-openai-meta-artificial-intelligence MY COMMENT Probably a good thing. Better than finding out after they are selling them. Also this will give them more time to clean out "old" inventory and will no doubt BOOST demand. On the negative side...it will allow competitors a little time to develop their products...but they are still far behind NVDA. Demand will be RAVENOUS when these new chips do ship in about three months. Short term....probably some impact on the markets next week.
Like some of the other posts regarding the previous week, I think it was more noise than anything. Let's not forget that it has been sometime since we have seen or experienced many red days. The first time it shows up, sends people bonkers. Yes, there were some pretty good pull backs with some of the companies here and there. Do they really think some of this is going to last forever and continually go straight up??? If so, they are going to get a rude awakening at some point. I think that is what took over the week as far as the headlines and other trash. From a broader sense, it was much about nothing.
A good little tip to take inventory of. Certainly if last week had someone on the edge of their seat....you may be way, way overweight in something and might need to make an adjustment. There is nothing wrong with that. Everybody has to find the balance they are comfortable with. One thing I used to do for an eye-opener was to look at the max drawdown for some of the stock. Can you handle that? Do you need that kind of risk? Sometimes it would help put things in perspective about allocations getting too heavy or above my risk threshold.
Of course.....I agree with this little article. BUT....that does not mean everyone should run out and bet the farm on this stock. It is the largest position in my portfolio thanks to the gains of the last three years......and....it now impacts my gain or loss in my portfolio every day. If you are considering this stock now....please.....do your research. Why now is the time to buy the Nvidia sell-off https://finance.yahoo.com/news/why-now-is-the-time-to-buy-the-nvidia-sell-off-143012767.html (BOLD is my opinion OR what I consider important content) "Nvidia’s (NVDA) “relief rally” on Wednesday was short-lived. The stock hit its lowest level since May, falling as much as 7% on Friday and wiping out its gains from earlier in the week amid a broader unraveling across the tech sector. The Nasdaq (^IXIC) entered correction territory, driven not only by signs of a slowing economy but also by fears that a handful of tech’s biggest players are overspending on AI. But that latter factor — a pledge to invest more in AI — should be viewed as a “catalyst” for Nvidia and other AI chipmakers. Wall Street pros were quick to tell Yahoo Finance this week that the AI trade is far from over, and the recent pullback should be viewed as a chance to scoop up shares. While the Big Tech companies are struggling to show the fruits of their AI labor, they're still committed to spending on chips for the long term. “It's a good buying opportunity given the prospects of the broader market,” Winthrop Capital Management’s Luke Stone told me following Nvidia competitor AMD’s (AMD) strong revenue forecast. “You’re seeing this delineation between the chip manufacturers and their customers, who have to invest more and more into the product and are really struggling,” Winthrop added. Just this past quarter, Meta (META), Alphabet (GOOG, GOOGL), and Microsoft (MSFT) posted more than $40 billion in expenditures. Amazon (AMZN) totaled $30 billion in spending during the first six months of the year and plans to spend even more in the second half. All have said the majority of that money is going toward AI. That’s not what the market wanted to hear. Shares of Amazon and Microsoft closed the week lower, similar to the drop in Alphabet shares last week, as investors made it clear the AI trade has turned into a show-me story. But what’s worrisome for hyperscalers is good news for Nvidia and its peers. “We've continued to see the [capital expenditures] guides actually go up materially and that's really what's important,” Bernstein managing director Stacy Rasgon told me. “People worry about sustainability but it looks like that spend, at least for now, is sustaining.” And that’s set to boost Nvidia’s top line, as Meta, Amazon, Google, and Microsoft account for more than 40% of the chipmaker’s revenue. “Fear that the revenue trajectory won’t be there over the next 12 months or so is now starting to ease,” CFRA’s Angelo Zino explained to me. “We think Nvidia is going to post some great results, and that is going to be a catalyst for the space.” In a note to clients earlier this week, Morgan Stanley’s Joseph Moore argued the sell-off in Nvidia presents a “good entry point” and moved the chipmaker back to its "Top Pick." “Our perception is that the market is taking a very glass half-empty view of some of the hyperscale comments, where there is a clear desire on the part of customers to continue to commit resources to developing multi modal generative AI,” Moore wrote. Synovus Trust portfolio manager Dan Morgan likened the opportunity to invest in Nvidia and other AI infrastructure stocks to suppliers who thrived during the gold rush. “Would you rather be the person who's digging gold or would you rather be the person that's selling the equipment to dig for gold?” he said. Nvidia closed the week off 5% and down roughly 26% from its record closing high. Despite the pullback, shares are still up 116% year to date. MY COMMENT For NVDA to be down by 26%......this early in their DOMINANT phase is simply....CRAZY. My view is that this company is just at the start of a MASSIVE and JUSTIFIED.....many year..... run. I have mixed emotions about a single stock having such an outsized impact on my portfolio daily.....but....there is NO WAY I am going to sell any of these shares. It is WAY EARLY in the life of this company. They are about where MSFT was in about 1993-1995.....in terms of making money and building more DOMINANCE. I will let this massive winner run. My view....their dominance....if they continue with the great management and company operations....can extend for 10-20 years or easily more. They are in position to stay in the short list of MONSTER TECH names for a long, long, time. Consider MSFT, AAPL, GOOGL, AMZN, META,....ALL these companies went through their HUGE grow phase.....and here 20-35 years later they are ALL STILL huge name companies that dominate world business. All these companies had bumps along the way....but here they are today. Of course on the flip side we have INTC......a perfect lessen in the impact of MANAGEMENT FAILURE. No doubt...current management at NVDA will not be around 20 years from now......so company culture, and management continuity over the long term is CRITICAL. What is INSANE is that this company has been SUPERBLY SUCCESSFUL as shown by earnings over the past 2-3 years.....and yet.....the markets have driven it DOWN by 26% right now.....with another EPIC earnings report on deck. I simply have ZERO explanation for this dip. It DEFIES ALL LOGIC.
As to the above....I suspect that NVDA will go down a bit more based on the delay in the BLACKWELL chip.....caused by a design flaw..... of 2-3 months. See the story above about this issue.....or..... https://finance.yahoo.com/m/43de1174-46c1-3cdd-a74a-b5dc0284b735/nvidia-reportedly-delays.html At least they caught this problem now....It would have been a real disaster if they did not catch it before racking up massive sales and shipping of the product. NOW.....it is simply a "media" issue. The chips will ship soon enough in 2-3 months and they are MONEY IN THE BANK. As a side note....I first bought this company due to their dominance in the Video Game market and their potential in self driving vehicles. I had no idea.....at the time..... that AI was going to take off as it has. A perfect example of......EDUCATED LUCK....in investing.
Here is a decent article explaining what is "normal", but we don't hear much about it other than the fear driven narratives just about anytime the wind blows a different direction in the market. This is normal (Ben Carlson/Wealth of Common Sense) Boy that escalated quickly. Markets sold off in a hurry this week. The S&P 500 is down almost 6% from the recent highs. The Nasdaq 100 is in an 11% drawdown. After an extremely calm year, the past week or so has finally seen some volatility in the stock market. Here’s the thing — it’s what happened before this that was not normal: This really cool chart came out a couple of weeks ago (via Sherwood). It shows how abnormally calm the stock market was in 2024 before the current correction. That situation couldn’t last forever so it didn’t. I hate love to be the guy who provides these reminders during every single correction but this is perfectly normal. The stock market is supposed to fall every once in a while. It can’t just keep going up forever. The U.S. stock market experiences a correction almost every year: A 5% downturn is all but guaranteed in most years.1 A double-digit drawdown happens more than two-thirds of all years since 1928. The average intrayear drawdown from 1928 to 2023 was -16.4%. Since 1950, the average correction in a given year was -13.7%. This century it’s been -16.2%. If anything, the current correction is weak based on historical data. It could get worse. I don’t know what’s going to happen the rest of the year. One week does not a market make. The S&P 500 is still up nearly 13% on the year. It was up as much as 20% at one point but we’re still looking at a double-digit total return in 2024 (so far). I don’t know if that will hold for the remainder of the year but it’s perfectly normal to experience a decent-sized correction even when the market finishes the year with solid gains. From 1928 through 2023, the S&P 500 was up 70 out of the 96 years (73% of the time). In 35 of those 70 years with positive returns, there was a double-digit correction along the way. So half of all years with a gain experienced double-digit losses to get there. The stock market goes down even when it goes up. This is true even when stocks go up a lot. The S&P 500 has finished the year up double-digits in 56 out of 96 years since 1928 (almost 60% of the time). In 24 of those 56 years with double-digit gains, there was a double-digit loss at some point in the same year. That means nearly 45% of the time when the stock market has been up 10% or more, there has been a correction of 10% or worse on the path to those gains. Maybe this year finishes with yet another double-digit gain, maybe not. Maybe we see another double-digit drawdown, maybe not. When investing in the stock market you have to be prepared for both possibilities. Big gains and big losses are par for the course when it comes to investing in stocks. Volatility is the price of admission when it comes to investing in equities. That’s true when markets go up or down.
GREAT one Smokie. As said above in the article: "When investing in the stock market you have to be prepared for both possibilities. Big gains and big losses are par for the course when it comes to investing in stocks. Volatility is the price of admission when it comes to investing in equities. That’s true when markets go up or down." YES....corrections are absolutely NORMAL market behavior. In the....."old days"....I would expect at least 1-2 corrections to happen every year......even in a big bull market. Also in the "OLD DAYS".....meaning 10-15 years ago and my entire prior 55+ years of investing.....corrections were not these ridiculous one to four week media driven events. They were NASTY things that often lasted for 2-4 months. It still makes me laugh to see some little two or three week event called a CORRECTION by the media.
Why we dont.....or should not....allow "government" to try to pick winners and losers in the business world. Short answer....BECAUSE THEY ARE MORONS. Intel’s massive job cuts come after it received $8.5 billion in taxpayer money The company's stock fell 26% on Friday after the announcement https://www.foxbusiness.com/markets/intels-massive-job-cuts-after-receiving-taxpayer-money
HERE is the week to come.......NO DOUBT....the media will be pushing the "recession" BS. They will milk this for every single possible click.......and so will the AI SPEED TRADING platforms. Stocks look to rebound during quieter week for economic data: What to know this week https://finance.yahoo.com/news/stoc...ic-data-what-to-know-this-week-114008847.html I like the EARNINGS information that is buried in the little article above: "While shifts in the macroeconomic narrative took center stage and weighed on markets last week, the S&P 500 as a whole is quietly posting its best quarter of year-over-year earnings growth in nearly three years. With 75% of the S&P 500 having reported results, the index is pacing for year-over-year earnings growth of 11.5%, per FactSet senior earnings analyst John Butters. This would mark the highest year-over-year earnings growth rate reported by the index since the fourth quarter of 2021. Looking ahead, analysts trimmed their third quarter earnings estimates by 1.8% in the first month of the quarter, in line with the average cut seen over the last 20 years." MY COMMENT Consider the coverage and market action this past week.....driven mostly by short term traders and HEDGE FUNDS......versus the above. What actually matters most to long term ivnestors?
I have to say.....YES....there is a lot of short term TALK in this thread....but what really counts is being in the markets for the LONG TERM. I can somewhat predict and see the probabilities of the long term. As to the short term....any discussion is simply that......just discussion.....NO ONE can call what is going to happen in the short term markets. The ONLY accurate prediction I can make about the short term markets is that they will be....IRRATIONAL, ILLOGICAL, and driven by emotion, drama, fear, and speculators trying to manipulate the markets.....sometimes legal sometimes illegal.
August is the habitual nonsense in part due to low volumes and increasing volatitlity. Sometimes this period gives investor some pieces of pie, some oportinities to the ones who can afford it, have free cash, and have time to do it. We had a big run during firts half, so some correction possibly is due to occur. Lets stay calm and enjoy summer, while having a marguerita!
Well, we have to talk about something since we are mostly doing nothing. Although, there are some great long term investing points throughout this thread. All sorts of points, tips, and encouragement from many posters.
Sounds good....and right as usual.... RG.......line up those "margueritas". If you need more I have some pre-mixed in my garage refrigerator right now.......Watermelon, Blueberry, and Strawberry. Good post....ENZO...keep up the good work and welcome to the board. Post any time you wish.
I see a lot of stories tonight about BUFFETT dumping a portion of his APPLE position. A perfect meaningless story line for the media to hype and fear monger tomorrow. I think BUFFETT is the past.....he had a great run......but lately he has made some horrendous mistakes. A few: * Not buying APPLE till about 2016 since he was not very familiar with tech. * The massive multi-billion loss on Paramount recently as he was forced to sell his entire position as a total failure. https://www.cnbc.com/2024/05/04/buf...mount-stake-we-lost-quite-a-bit-of-money.html * His selling of COSTCO in 2020...leading to a loss of a $1.5BILLION gain if he had held onto it. https://markets.businessinsider.com...o-stock-sale-portfolio-pandemic-munger-2024-1 etc, etc, etc, etc. If I was BUFFETT what would I do with that $76BILLION that he just netted from APPLE? I would put a HUGE chunk of it into NVDA. I know he does not like to invest in companies that he does not understand......but....I am sure he totally understands the CHIP business and the huge......sea-change/industrial-revolution......we are just at the start of right now. With the stock being down about 26% right now it should be right up his alley.
