The Long Term Investor

Lots of....FREAK OUT...story-lines today. OMG....tech earnings. OMG....the FED is meeting. And a little bit of lingering....OMG DeepFake.

So pretty much a worthless day today.

In the end they will ALL be meaningless. The FED will do NOTHING. The MSFT earnings FEARS will turn out to be nothing....although the markets and traders will nit-pick the earnings and no matter how good will find something to be negative and disgruntled about.

DeepFake....I have nothing on that topic...it has been beat to death.

So, I am off to run some early errands....and IGNORE the markets.

SOMEONE POST SOMETHING.

 

One of the BIG items today....although totally expected.

Fed holds rates steady, takes less confident view on inflation

https://www.cnbc.com/2025/01/29/fed-rate-decision-january-2025.html

"Key Points

• The Federal Reserve left unchanged its overnight borrowing rate in a range between 4.25%-4.5%.
• The decision followed three straight cuts since September 2024.
• The post-meeting statement offered a somewhat more optimistic view on the labor market while dropping a key reference from the December statement that inflation “has made progress toward” the Fed’s 2% inflation goal."

MY COMMENT

Nothing to see here....moving on to earnings after the bell.

 

A basic red day for me today. And I got beat by the SP500 today by 1.21%. Pretty much as expected....considering the current state of the markets.

 

Here are the MSFT earnings.

Microsoft shares slip on light quarterly Azure growth

https://www.cnbc.com/2025/01/29/microsoft-msft-q2-earnings-report-2025.html

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


"Key Points

• Microsoft’s results for the fiscal second quarter exceeded Wall Street consensus.
• The company’s Azure cloud growth slowed from the previous quarter.
• But the company’s artificial intelligence business now does about $13 billion in annualized revenue.

Microsoft shares tumbled as much as 5% in extended trading on Wednesday after the software company issued fiscal second quarter results that included lighter growth in Azure cloud computing services than expected.

Here’s how the company did in comparison with LSEG estimates:

• Earnings per share: $3.23 vs. $3.11 expected
• Revenue: $69.63 billion vs. $68.78 billion expected

Microsoft’s revenue grew 12.3% year over year in the quarter, which ended on Dec. 31, according to a statement. That represents the slowest growth since mid-2023. Net income of $24.11 billion was up from $21.87 billion in the same quarter a year ago.

The company’s Intelligent Cloud segment, which contains the Azure cloud, contributed $25.54 billion in revenue. That was up about 19% but below the $25.83 billion consensus among analysts polled by StreetAccount.

Revenue from Azure and other cloud services jumped 31%, down from 33% in the prior quarter. Microsoft now has a $13 billion annualized revenue run rate for artificial intelligence, CEO Satya Nadella was quoted as saying in the statement.

Of the growth in the fiscal second quarter, 13 percentage points came from artificial intelligence. Microsoft does not disclose Azure revenue in dollars. Analysts polled by CNBC and StreetAccount had been looking for 31.9% and 31.1% growth, respectively.

Microsoft’s Productivity and Business Processes segment that includes Office productivity software subscriptions and LinkedIn posted $29.44 billion in revenue. That was up 13.9% and more than StreetAccount’s $28.89 billion consensus.

The More Personal Computing unit that includes Windows, Bing, Surface and Xbox delivered $14.65 billion in revenue. The number was flat year over year and higher than the StreetAccount consensus of $14.29 billion.

Sales of devices and of Windows operating system licenses from device makers were up 4%. Technology industry researcher Gartner estimated that the PC shipments increased 1.4% in the quarter.

The company reported $15.80 billion in fiscal second-quarter capital expenditures, excluding finance leases. The consensus among analysts polled by Visible Alpha was $15.70 billion.

Microsoft had $2.29 billion in its “other expense” line item. In October Amy Hood, the company’s finance chief, had projected $1.5 billion in “other expense,” mainly because of Microsoft’s share of expected losses at OpenAI, in which Microsoft has invested nearly $14 billion to date.

During the fiscal second quarter, Microsoft announced the Windows 365 Cloud Link, a PC that corporate workers can use to access their applications and files stored in the cloud. The company’s GitHub unit announced support for artificial intelligence models from Anthropic and Google for a programming chatbot in addition to existing support for OpenAI. Microsoft also invested an additional $750 million into OpenAI during the quarter.

Microsoft shares slipped 2% on Monday as investors considered the implications of AI models from DeepSeek, a Chinese lab. DeepSeek in December introduced an open-source model that the lab said it trained for $5.6 million, excluding costs of data and earlier research. That would make it more efficient than models from major U.S. companies. And last week, DeepSeek said its newest model, R1, outperformed OpenAI’s in some tests.

“We should take the developments out of China very, very seriously,” Nadella said Jan. 22. Nadella has committed to spending $80 billion on AI infrastructure in the current fiscal year.

Before the earnings release, Microsoft shares were up 5% so far in 2025, while the S&P 500 index had gained about 3% in the same period.

Executives will discuss the quarterly results with analysts and issue guidance on a conference call starting at 5:30 p.m. ET. Analysts might ask management why Microsoft did not participate in a Jan. 21 White House press conference for the Stargate AI infrastructure project involving OpenAI that could attract up to $500 billion in investment."

MY COMMENT

Good solid earnings and for the most part a good BEAT. But of course when you see an article like this start out....Microsoft’s results for the fiscal second quarter exceeded Wall Street consensus.......you know it is not going to matter. the critics are going to find some little piece of earnings to WHINE about.

We have been in this frame of mind for a few years now.....the whole of earnings is worthless....even if a good beat. Any little piece is going to tank the whole thing. It is simply.....style...over.....substance.

 

I dont own these but here are the other earnings today:

Meta beats on revenue, provides soft guidance

https://www.cnbc.com/2025/01/29/meta-q4-earnings-report-2024.html

and

Tesla fourth-quarter results miss estimates as automotive revenue drops 8%

https://www.cnbc.com/2025/01/29/tesla-tsla-2024-q4-earnings.html

MY COMMENT

Of course the current golden child of big tech, recently....META....posts what I would call a borderline earnings report and a revenue projection for the future below consensus......and bingo...... the stock is UP after hours. Go figure.

 

A perfect little article for what we see and hear every day.

Right Here, Right Now

https://behaviouralinvestment.com/2025/01/28/right-here-right-now/

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

"Last week, I asked ChatGPT the following question: “Between 2018 and today, can you tell me what the major financial market worry was for each quarter?” Here was the response:



Reading through them all made me a little misty eyed about all the time spent in my career working on and worrying about issues that didn’t end up mattering that much (from an investment perspective, at least).

There is, however, a genuine problem here for investors. Financial markets tend to be an unstoppable conveyor belt of in-the-moment critical concerns that we cannot help but engage with, almost always in ways that are to our detriment.

It is human nature to be drawn towards things that are both salient and available. In financial markets, that means the more available (or prominent) an issue is, the more likely we are hugely overstate both its importance and the risk it presents.

Our engagement with this phenomenon typically works something like this:

Stage 1: A news story becomes the focus of investor / market attention.
Stage 2: We greatly overweight its long-term importance.
Stage 3: We develop ‘shallow expertise’ and a passable opinion on the subject.
Stage 4: We calculate our ‘exposure’ to the issue.
Stage 5: We inaccurately predict how financial markets will be impacted.
Stage 6: We either make a poor decision or have to justify not making one.
Stage 7: We move on to next in-the-spotlight news story.
Stage 8: We entirely forget what we said in Stage 1-6 within a few months.

For any investor with a reasonably long time horizon, attempting to ignore whatever the market is focusing on at any given point in time is the sensible (and most lucrative) approach. Unfortunately, this can be close to impossible. For three reasons:

– It is hard to ignore something when everyone else is paying attention to it.

– We are human and thereby exposed to the same risk perception biases as everyone else. We must work exceptionally hard to behave differently.

– Sometimes something will matter to financial markets in a material way and ignoring it won’t look smart.

The issue of something ‘mattering’ is an important one. Most high-profile stories will move financial markets in some way, but that does not mean it should be important to us. It should only really matter to us if it has a predictable, fundamental impact on how we are invested over a time horizon that is relevant. For most sensibly diversified investors this should be an incredibly high hurdle.

If we are obsessing over short-term market fluctuations, it is critical to remember that these are predominantly the activities of investors with entirely different objectives to those that we have. They are talking a different language, one that we don’t need to be conversant in.

One way to help protect ourselves from being frequently dragged into the latest financial market fascination is to keep a log of what it is we are worrying about each month and what we think about it. Looking back on how often seemingly essential topics fade from view might just give us a slim hope of insulating ourselves in the future.

What has our gripped attention right now will probably matter just as much as that financial market fixation from last month and the one that arises next month. I can’t wait to find out what it is."

MY COMMENT

Yes......we are IDIOTS. that is the basic bottom line.

 

Obviously....TOTALLY agree TireSmoke. It is a tale of two markets.....the long term little retail investors......and....the AI driven Program Traders. Unfortunately the short term AI Traders......are totally jerking tthe day to day markets around trading headlines and news items.....regardless of fundamentals.

 

To continue....what the retail investors did when NVDA sank.

Nvidia says DeepSeek advances prove need for more of its chips

https://www.reuters.com/technology/...dvances-prove-need-more-its-chips-2025-01-27/

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

SAN FRANCISCO, Jan 27 (Reuters) - Nvidia, on Monday said Chinese AI firm DeepSeek's advances show the usefulness of its chips for the Chinese market and that more of its chips will be needed in the future to meet demand for DeepSeek's services.

Nvidia issued a statement on Monday after its shares tumbled 17% to $118.58 on investor concerns that DeepSeek had matched rivals such as OpenAI using far fewer Nvidia chips than U.S. firms. Nvidia rival Advanced Micro Devices' shares also slid more than 6% to $115.01.

"DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant," Nvidia said in its statement.

One of DeepSeek's research papers showed that it had used about 2,000 of Nvidia's H800 chips, which were designed to comply with U.S. export controls released in 2022, rules that experts told Reuters would barely slow China's AI progress.

The U.S. microchip export controls were designed to freeze China's development of supercomputers used to develop nuclear weapons and artificial intelligence systems.

Jimmy Goodrich, a senior adviser to the RAND Corp for technology analysis, said there are at least a dozen major supercomputers in China with significant numbers of Nvidia chips that were legal for purchase at the time that DeepSeek used them to learn how to become more efficient. Computing efficiency has also been a major focus of U.S. AI firms.

"DeepSeek didn't come out of nowhere - they've been at model-building for years," Goodrich said. "It's been long known that DeepSeek has a really good team, and if they had access to even more compute, God knows how capable they would be."

DeepSeek was struggling on Monday to accommodate an influx of new users. Servicing new users is a process that AI firms call "inference," which Nvidia said demonstrated that its chips will remain in demand.

"Inference requires significant numbers of Nvidia GPUs and high-performance networking," Nvidia said in its statement.
Nvidia is currently selling a chip called the H20 that is designed to meet the most recent export control regulations. While the restrictions limit the chip's usefulness for AI training, Goodrich said it is "probably the best chip in the world for inference."
"How long will Washington allow the best inference chip in the world to be sold to China?" he added.""

MY COMMENT

This story was totally media sensationalized. In fact it did not come out of nowhere.....at all. In the end it will of course....be a strong positive for NVDA.

 

As to the TireSmoike post above.

The AI Trading Platforms.....trade by totally IGNORING fundamentals and other business data. They simply trade the news headlines and short term....micro-second....content.

As AI grows in power....this is where the potential for this sort of "stuff"....to destroy the markets will come from. As this sort of trading becomes more massive and ubiquitous.......and drives the total markets every day....we will inevitable end up with even the long term markets disconnected from business fundamentals as a result.

When that happens.....the markets as a growth and compounding vehicle is DEAD.

 

LOL....a happy little post above to start the day.