The Long Term Investor

I just spent the last couple of hours running through 27 songs for the current band. We have a two week break so I am fine tuning all the material.

While doing that I saw that the markets finally WOKE UP and got over the IDIOCY....at least for a while. I am now generally in the green.

Looks like your intelligent and educated aggressiveness got you a great price on some more shares of NVDA.....Tiresmoke.

 

I am looking forward to the GUTS of the big cap tech earnings next week......AMZN, AAPL, and MSFT.

 

LOL.....I see the markets went right back to....STUPID MODE....while I have been out over the last hour.

So as a result I was in the RED today.......I also lost out to the SP500 by 1.00%.

ONWARD AND UPWARD........whenever.

 

This should end all the CMG social media DRAMA.

Chipotle to Splurge on Bigger Portions to Keep Diners Happy

https://finance.yahoo.com/news/chipotle-sales-beat-market-expectations-201432864.html

"The burrito chain will take a hit by ensuring workers serve “correct and generous portions,” Chief Financial Officer Jack Hartung told analysts during the company’s earnings conference call. Chipotle found that about 10% to 15% of its restaurants were getting a disproportionate number of comments about portion sizes...."

"The company is “doubling down” on training at those stores to ensure workers serve the right amount of food, including the required two generous scoops of rice and four ounces of meat. Meeting those standards will cost the company an extra $50 million..."

“We’re telling our teams, listen, we don’t want you to be skimping on portions,” Hartung said. “If you’re not sure whether to go a little more or a little less, go a little more.”

"Chipotle has no plans for further price increases this year, adding that he expects avocado prices to ease by year-end."

 

Market averages are all in the green.....but I am ignoring them. This is a nice little long term oriented article.

What’s the Worst Long-Term Return For U.S. Stocks?

https://awealthofcommonsense.com/2024/07/whats-the-worst-long-term-return-for-u-s-stocks/

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

"A reader asks:

My wife and I are in our late 30s and hoping to retire at 60, when we can begin withdrawing from our retirement accounts penalty-free. Our plan is to let our current stock portfolio, which is valued at approximately $650K, ride for that 22 year period, while continuing to max out our Roth IRAs annually. Let’s say that the stock market’s average annual rate of return, when adjusted for inflation, is around 7%. We can therefore estimate that our portfolio, when we retire at age 60, will be about $3.6 million (in today’s dollars). A more conservative 6% rate of return yields a portfolio of $3 million. Of course we’re not guaranteed a 7% or even a 6% annual rate of return, especially when looking out over a few years. My question is, based on historical data, how confident can we be that over a 22 year period we’ll get an annual rate of return that approaches the average rate of let’s say 7%. In stock market history, what is the worst annual rate of return over a 22 year period? What percentage of 22 year periods have an annual rate of return that is at least 6%?

Some people might look at this as homework. I look at is as a challenge.

This question is definitely in the Ben Carlson wheelhouse. What can I say — I’m a sucker for market history and retirement scenario planning.

A few things I like about this question:

• I like how they’re thinking in real terms since inflation can add up over the decades.
• I like how they’re thinking about inflatin adjusted returns since spending is what matters during retirement.
• I like how they’re thinking in terms of both baseline and worst-case scenarios. It’s important to look at a range of outcomes when setting expectations.
• I like how they’re thinking long-term in their late 30s.

Let’s go to the data!

From 1926 through June 2024, the S&P 500 had compounded at an inflation-adjusted return of 7.2% per year. That’s a pretty darn good average. Real returns have not been this high in most other countries but the winners write the stock market history books, as they say.

Here’s a look at the rolling 22-year real annual returns for the S&P 500:




Surprisingly, the worst 22 year period for real returns was not in the aftermath of the Great Depression but rather in the 1970s. The two-plus decade real return ending in the summer of 1982 was just 1.4% per year. That time frame featured an annual inflation rate of nearly 6% which is a high hurdle rate to beat.

The best return came in the period leading up to that high inflation, with a 13.2% real annual return ending in the spring of 1964. The period after the 1970s debacle also produced wonderful real returns, with close to 13% annual inflation-adjusted gains ending March 2000.

As always, markets are cyclical.

The most recent period ending June 2024 was close to the long-term average at 7.5% real annually.

The good news is that real returns have not been negative over the past ~100 years. The bad news is that there can be a wide range of results, even over the long run.

Here are the historical win rates at different annual real return levels:

• At least 3% (92% of the time)
• At least 4% (80% of the time)
• At least 5% (71% of the time)
• At least 6% (59% of the time)
• At least 7% (45% of the time)
• At least 8% (40% of the time)

The future doesn’t have to look like the past, but even if we use history as a guide, high real returns are not a sure thing.

In two out of every five instances, real returns were less than 6% over these rolling 22-year periods. In my book, a 4-5% real return is pretty decent, and those levels were hit more often than not.

However, risk exists in the stock market, even with a time horizon of two-plus decades.

This is what makes retirement planning so difficult. There are all kinds of unknowns to deal with, returns being one of the most nerve-racking.

When planning for a multi-decade time horizon it’s important to:

• Set baseline expectations with the understanding they are educated guesses.
• Update your plans as those expectations do or do not become reality.
• Include a margin of safety in the planning process.
• Make course corrections along the way when needed.

Investment planning would be much easier if you were promised a specific rate of return but financial markets don’t work like that.

You have to make reasonable decisions in the present about an unknowable future and be flexible enough to adapt when things don’t go as planned.

That’s not the precise answer most people would like to hear but financial planning does not come with 100% precision.

And if you’re planning for retirement in your late 30s, you’re not bound to a 22-year time horizon.

You can work longer or save more or change plans if necessary."

MY COMMENT

The best course is to rack up as much money as you can during your working years. Start early and save as much as possible. there are absolutely NO guarantees what the markets will produce if you are counting on them for a long term retirement. Set realistic investing goals and be extremely clinical and rational in how you invest.

I still see the SP500 as the GOLD STANDARD for Index investors and for retirement accounts.

 

Very cool looking vehicle Tiresmoke. One thousand HP is wild. Do you ever enter the Corvette Museum raffles. The odds are pretty good on many of them. I have entered a few times years ago.....but never won one. The brother of a deceased friend of mine has won TWICE. He has two insane Corvettes siting in storage in mint condition.

 

Speaking of the SP500 Index above.

The Death of Stock Picking

https://smeadcap.com/missives/the-d...516&utm_content=316798246&utm_source=hs_email

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

"In a recent The Wall Street Journal article, Jason Zweig correctly pointed out that 85% of active stock-picking funds and ETFs had underperformed their benchmark. In many ways, his thesis could be called “The Death of Stock Picking!” Since Jason and most of the financial community have built their investments around owning the S&P 500 Index at the core of their portfolio, investors have feasted on record-setting returns since the stock market bottomed in 2009. Fortunately for stock owners like us, dogs chase cars and people chase stocks! Jack Bogle is taking a victory lap in heaven for the success of his investment strategy.

This got me thinking about a time in the U.S. that appears to be the antithesis of today. It was August of 1979, and the cover story of BusinessWeek magazine was, “The Death of Equities.”

Here is how the article explained the late 1979 circumstances:

“At least 7 million shareholders have defected from the stock market since 1970, leaving equities more than ever the province of giant institutional investors. And now the institutions have been given the go-ahead to shift more of their money from stocks—and bonds—into other investments. If the institutions, who control the bulk of the nation’s wealth, now withdraw billions from both the stock and bond markets, the implications for the U.S. economy could not be worse.”

This brings us to today. Household ownership of common stocks has grown from 15.6% in 1982 of Federal Reserve Board Z-1 Household Assets to 47% today. As you can see below, 58% of all families own common stocks and that is up from 32% in 1989.



Referring back to 1979, the groundwork was laid for that depressing stock market environment by the era from 1941 to 1968. The enthusiasm for common stocks peaked in 1968 at the end of the year in an aggressive stock market referred to as “The Go-Go 1960s.” T. Rowe Price and Warren Buffett both prepared for a more difficult environment in their writing and their actions.

Stock pickers have relatively lower returns because they have their expense ratio to cover. Therefore, it was unlikely that a majority of them would beat the stock market in normal times. However, when a narrow group of stocks dominated returns like they did in 1971-1972, 1998-2000 and in the last ten years, it is surprising anyone did! In recent history, the F.A.N.G. stocks and, more recently, the Magnificent 7 stocks overwhelmed the S&P 500 Index.

If you add Google, Facebook, Amazon, Tesla and Netflix back into the information technology sector of the S&P 500 Index, tech equals 45% of the index. To put that into perspective, the energy sector was 29.74% of the S&P 500 Index in 1981 and was the only major sector that had made money in the prior ten years. Energy is 3.51% of the S&P 500 Index today.

When the bloom comes off the glamour tech stock rose, the S&P 500 Index could become a bit of a death camp for capital. The momentum in this current euphoria episode could become momentum headed in the wrong direction. At that point, we will find out if there are worthy stock pickers. Fear stock market failure."

MY COMMENT

There is no guarantee in the markets. In fact when you combine all the crazy "stuff" that impacts the markets along with human emotion that is rampant in investors......well.....I believe it is just about impossible for the average person to beat the SP500 long term. We know the professionals can not do it.

Unfortunately as we move forward into the brave new world of the future.....it appears that AI and all the other advances in the markets just make things more complex and more difficult for investors.

So what do I do.....I try to avoid it all and invest in the same way I have for over 50 years. I try to ignore it all and do things in the same simple way and with the same simple thinking that I have always used.

Much of that thinking....of course....is reflected in this thread.

 

As usual the economic news is good for the FED.

Fed's preferred inflation gauge shows prices rose at slowest pace since March 2021

https://finance.yahoo.com/news/feds...-slowest-pace-since-march-2021-123442847.html

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

"The latest reading of the Fed's preferred inflation gauge showed prices increased slightly more than expected in June.

The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.6% over the prior year in June; above economists' estimate of a 2.5% increase and unchanged from the month prior. Still, the print marked the slowest annual increase for core PCE in more than three years.

Core PCE rose 0.2 % from the prior month, in line with Wall Street's expectations for 0.2% and faster than the 0.1% increase seen in May.

"It is another bit of evidence for the Fed to say, yes, the upside that we saw on inflation, the first quarter was largely an aberration," BofA Securities head of US Economics Michael Gapen told Yahoo Finance. "It did not break the disinflation trend. Inflation appears to be decelerating, gradually, in the direction that the Fed wants."

Nationwide chief economist Kathy Bostjancic described Friday's PCE print as "benign." Bostjancic added the data provide "clear support" for the Fed to begin cutting interest rates in September.

The report follows recent promising inflation prints. The most recent reading of the Consumer Price Index (CPI) showed core prices climbed 0.1% from the prior month, lower than economists' estimates.

Ahead of Friday's PCE release, Federal Reserve chair Jerome Powell noted recent inflation data "add somewhat to confidence" inflation is moving toward the Fed's 2% target. The Fed's next monetary policy decision will come on July 31.

Markets widely expect the Fed will hold interest rates steady at its July meeting before initiating its first interest rate cut in September."

MY COMMENT

To be a broken record......inflation is in the low end of the normal historic range. Three to four percent in a good economy is perfectly normal. We should be good to go for rate cuts probably starting in September. Although.....the FED meets next week.

 

This would not surprise me at all.

Why stocks could be nearing a 10% correction

https://finance.yahoo.com/news/why-stocks-could-be-nearing-a-10-correction-140716938.html

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

"They say what goes up must come down, but if you’re the current stock market, coming down has taken a wild turn that may be on the cusp of straightening out.

“We think this is the time for consolidation of the gains,” Morgan Stanley's closely-watched chief investment officer Mike Wilson told Yahoo Finance executive editor Brian Sozzi on his Opening Bid podcast (see video above or listen here).

Wilson believes stocks are headed for a 10% correction in the third quarter, on the back of thin summer trading volume and yawning worries about the presidential election in November.

By and large, the market has side-stepped correction calls from Wall Street for much of the year.

The S&P 500 is up 14% year to date amid strong corporate earnings and anticipation of interest rate cuts this fall. The Nasdaq Composite is up 13% this year, powered by AI optimism. And the Dow Jones Industrial Average has clocked in with a respectable 6% advance.

But cracks are emerging in the bull thesis.

The Nasdaq has been hit by almost 3% in the last five trading sessions due to valuation concerns, mixed results from Alphabet (GOOG, GOOGL), and outright poor earnings figures from Tesla (TSLA).

Market darling Nvidia (NVDA) has dropped by more than 5% in the past five days, while rival AMD (AMD) has shed around 10%.

Over the past 10 days, the S&P 500 is down about 3%, while the Nasdaq is down more than 6%.

Wilson fancies those cracks may spread and weigh further on stocks in the near-term.

He points to the ISM Manufacturing Index remaining “in contraction territory.” Manufacturing woes is lessening, but services, which is still 70% of the economy, is now weakening "substantially.”

“Where we are is a late [economic] cycle still," Wilson adds.

With economic growth deteriorating, Wilson notes, stock multiples go up “because of the hope for the Fed to ease policy.” That's an unwelcome backdrop for investors to wade into stocks, Wilson says.

And so is the fact the government is spending “gobs of money on fiscal policy to keep things moving along."

The AI sell-off could also rage on, hurting broader market sentiment further.

“We’re believers that AI will lead to productivity increases over time, but expectations got ahead of the timing of this development,” Wilson said.

Wilson isn't alone in bearish on the short-term.

Veteran strategist Keith Lerner of Truist says the "corrective period" in tech has further to go. He downgraded his views on tech stocks in June.

Adds Lerner, "This choppier market action of late is consistent with our expectations, and is set to continue. Our base case is that the longer-term bull market remains intact, but it’s often two steps forward, one step back.""

MY COMMENT

YES.....we are probably past due for a correction. although we have seen somewhat of a rolling correction lately. Two of my nine stocks are in correction......NVDA and CMG. Plus we are seeing much skittishness in the day to day action of the big cap tech world.

Corrections and periods of consolidation are perfectly normal in the markets. AND.....often what goes along with them is investor fear, panic, and media fear mongering which makes things seem worse than they are.

It seems like fundamentals dont really matter any more when you look at the short term markets. BUT....over the long term that is about all that does matter.

SO.....ignore it all, live your life, continue to invest, hang in there and secure your future.

 

Living in the modern world. It is height of IRONY that this happened to a company that is a....DIGITAL SECURITY FIRM.

Security firm experiencing nightmare after learning remote employee is North Korean hacker
The US State Department also opened an indictment against a North Korean hacker

https://www.foxbusiness.com/technol...r-learning-remote-employee-north-korea-hacker

"A digital security firm got the shock of a lifetime when it came to light that one of its remote workers was actually a North Korean hacker after he infected his new company laptop with malware.".....

"We posted the job, received resumes, conducted interviews, performed background checks, verified references and hired the person."

 

WELL....the averages are still all green....but backing off a bit.

All I care is to just get today over with and move on to next week. We need a fresh start.

 

At this moment I have seven of nine stocks in the green. The losers so far today.....CMG and GOOGL.

CMG is totally ignoring a good earnings BEAT. Fortunately the CEO has finally discovered that simply ignoring a social media campaign......(portion size)..... does not work. You cant just sit there and take....you have to be proactive and address the issue head on....which they finally did yesterday.

As to GOOGL......they seem to have replaced AAPL as the current big cap tech....whipping boy.

 

OK....a green close for me. About time. I did have two stocks in the red today....CMG and GOOGL. I also got beat by the SP500 by 0.42%.

I will simply take it and move on.

 

The market this week.

DOW year to date +7.62%
DOW five days +0.43%

SP500 year to date +15.10%
SP500 five days (-1.54%)

NASDAQ 100 year to date +15.00%
NASDAQ 100 five days (-3.78%)

NASDAQ year to date +17.55%
NASDAQ five days (-3.16%)

RUSSELL year to date +12.28%
RUSSELL five days +3.14%

As for......."ME"....I was down to a year to date return for my entire portfolio of......+37.42% as of the close today. Last Friday I was at.....+41.48%.

FORGET this week it is over and we......MOVE ONWARD.

 

HAVE A GREAT WEEKEND EVERYONE.

 

Some interesting......"ALLEGATIONS"....yes....."ALLEGATIONS".....here regarding market manipulation by a professional trader and Hedge Funds.

Short seller Andrew Left of Citron charged with fraud by prosecutors, SEC

https://www.cnbc.com/2024/07/26/short-seller-andrew-left-charged-with-fraud-by-prosecutors-sec.html

MY COMMENT

Regarding this general topic.....NOT IN REGARDS TO THE ABOVE......and....NOT IN REGARDS TO ANY SPECIFIC COMPANY OR PERSON......I believe manipulation of the markets by short term traders and other sorts of traders is RAMPANT. Some of it might be technically legal....but I would bet that much is illegal. I would also bet that much of the action by SPEED TRADING AI PLATFORMS......"might"......also be market manipulation and illegal. BUT....in order to know you would have to dig into all their algorithms and trading records.....something the government is probably incompetent to do and would not do anyway.

In any event interesting reading in the article above.

 

I like this little article.

What Q2 2024 US GDP Says About Sentiment
Stocks should like today’s budding optimism.

https://www.fisherinvestments.com/e...tary/what-q2-2024-us-gdp-says-about-sentiment

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

"Q2 US GDP hit the wires Thursday, and people were ... oddly happy.

They noted the acceleration from 1.4% annualized growth in Q1 to 2.8% and cheered the economy’s resilience in light of higher interest rates. “Soft landing” chatter started giving way to more vibrant adjectives. Some coverage started looking to 2025 with rose-colored glasses, speculating about a pending boom as public investments start paying off.

The sentiment uplift is encouraging, and it matches what we have observed elsewhere this year. Budding optimism is a fine thing for stocks, and we still see some skepticism—this isn’t euphoria. But there are hints of what misplaced optimism may eventually look like in today’s GDP coverage, and we think investors would do well to take note.

To be clear: This was a good report. Not only did GDP accelerate, but the private-sector components most relevant for stocks shone brightly. Business investment accelerated from 4.4% annualized to 5.2% as corporations went on offense.[ii] Investment in equipment, which suffered as businesses spent two years cutting back in anticipation of a recession that never arrived, surged 11.6% annualized. Investment in intellectual property products (software, research & development, etc.), which has been doing a lot of the heavy lifting, slowed but still grew a respectable 4.5% annualized.[iii]

Spending on commercial structures took a breather after a banner stretch, falling -3.3% annualized, but this looks more to us like a redeployment of resources than overall nerves.[iv] Also supporting the return to offense, the inventory drawdown flipped to a boost, adding 0.8 percentage point to headline growth.[v] That contribution is, as inventories always are, open to interpretation. But after several quarters’ falling contributions, this looks to us like restocking.

We have said for a while that after two years of trimming excess and building balance sheets, corporate America was ready to hit the gas. You could see it in capex plans, big cash buffers, the return to earnings growth and improved guidance for both earnings and revenues. Companies had the will and the firepower, and now it seems we are seeing more fruit. Stocks have seen this coming, and we think this year’s rally has, in part, pre-priced it. But we suspect there is more to come.

At the same time, we think it is important to be measured. So, let us talk about consumer spending, which inspired a lot of cheer. It accelerated from 1.5% annualized in Q1 to 2.3%.[vi] Headlines cheered the dual growth in goods and services, heralding consumers’ strength and the rising wages that underpin it. Which, sure, totally. That is correct, in our view. But there may be a bit of a base effect here as well. We noted last quarter that the BEA has struggled with seasonal adjustments in Q1, with lockdowns and reopening compounding the problem. The seasonally adjusted results, it seemed, didn’t quite scrub away the normal post-holiday hangover. That isn’t the only reason consumer spending on goods fell -2.3% annualized in Q1—the auto industry’s ongoing supply struggles played a role there—but it probably contributed, setting a lower baseline for Q2 and enabling a shinier result.

We aren’t trying to talk things down or say spending was bad, weak, or, or or. It was good! We simply note: A discussion of the base effect was absent from the broader news coverage. In a more pessimistic or skeptical environment, pundits would usually look for every darned cloud in the silver lining—and invent some if they found nothing. Now, they seem much more eager to brush past caveats. Again, this is the tiniest of caveats. But omitting mention of them is the sort of thing you will see a whole lot more, in glaring and increasingly illogical ways, when sentiment does reach euphoria eventually. Therefore, we think it is important to train your eyes and mind to spot it now, well before that happens, so that you are equipped.

In the meantime, while sentiment is a lot warmer, there is still enough skepticism to preserve a bullish gap between expectations and reality. While pundits do seem to have shaken off rate fears for today at least, they found other reasons to preach tempered expectations. The common thread seemed to be a focus on the labor market. Several articles warned only solid employment is enabling consumer spending and noted the uptick in weekly jobless claims lately. If layoffs continue and escalate, they warn, it will sap consumer demand and threaten the broader expansion.

In our view, this gets things backward on a few fronts. Consumer spending is pretty stable even at times of high unemployment, since most of it goes to essential goods and services rather than luxuries and nice-to-haves. Hence why business investment, not spending, tends to be the economic swing factor. Additionally, economic growth generally creates jobs, not the other way around, with rising unemployment following economic contraction at a lag. To us, this is misplaced skepticism, making it easier for reality to keep delivering positive surprise."

MY COMMENT

Despite the current attempt by the markets to correct......or probably more accurately....consolidate, the bull market remains the current and future market bias.

However I suspect that this GDP figure will be revised down as usual.