The Long Term Investor

All in all not a bad week for the markets.


DOW year to date +6.07%
DOW five days +1.04%

SP500 year to date +11.82%
SP500 five days +1.34%

NASDAQ 100 year to date +12.21%
NASDAQ 100 five days +1.76%

NASDAQ year to date +13.00%
NASDAQ five days +1.74%

RUSSELL year to date +4.04%
RUSSELL five days +1.06%

I continue to rack up the gains...even though the markets seem listless and drifting. I am NOW at +26.54% year to date for my entire account. Last Friday I was at +24.28% for my entire account.

OUTSTANDING for only five months into the year. I also note that the SP500 is now at year to date +11.82%. That is a HUGE return for the index for only five months.....way ahead of what all the "experts" were predicting for this year.

 

HAVE A GREAT WEEKEND EVERYONE.

We all deserve it having ENDURED yet another week in the short term markets.

I continue to be amazed at how dull and boring and directionless the markets seem....actually....borderline negative. Yet at the same time....we are racking up nice gains every week. A true STEALTH RALLY time in the markets for long term investors.

I will be hiding out in my DOOMS-DAY BUNKER on Wednesday waiting for the NVDA earnings. My bunker being....a couple of aluminum trash cans buried in a hole in my back yard.

 

The market close today.

Dow closes at record high above 40,000 to cinch a five-week winning streak

https://www.cnbc.com/2024/05/16/stock-market-today-live-updates.html

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

"The Dow Jones Industrial Average closed Friday above the key 40,000 level for the first time in history, a day after hitting that benchmark in the previous trading session.

The 30-stock average rose 134.21 points, or 0.34%, to 40,003.59. The S&P 500 inched up 6.17 points, or 0.12%, to 5,303.27, while Nasdaq Composite ended down 12.35 points, or 0.07%, at 16,685.97.

Shares of Walmart and Caterpillar, both trading 1% higher, led the Dow. Chubb and Valero Energy, respectively up more than 3% and 4%, were the biggest gainers in the S&P 500.

Stocks finished the week strong, with the Dow up 1.2% to notch its fifth straight weekly gain. The S&P 500 and Nasdaq climbed 1.5% and 2.1% week to date, cinching their longest winning streak since February.

On Thursday, the Dow reached an intraday high of 40,051.05, above the psychologically important 40,000 level, before pulling back to end the day down 0.1%.

This week’s ascent has helped propel the three indexes into positive territory for the second quarter despite a tough start. The S&P 500 and Nasdaq are now each up more than 11% in 2024, while the Dow has climbed more than 6% this year.

While concerns over the durability of the current rally have been voiced by some investors, Tom Hainlin believes that the combination of economic growth and decelerating inflation is the perfect catalyst.

“That’s a fairly optimistic setup for at least the near future here in 2024,” the senior investment strategist at U.S. Bank Asset Management told CNBC. “We appreciate that valuation is a little high relative to history, but so is earnings growth and so is earnings stability.”"

MY COMMENT

KICKING ASS this week, and this year. Long term investors that BELIEVE are being very nicely rewarded.

 

OK....LORI in England. How are things over there?

Have you been participating in the current RALLY with your portfolio? I hope so. Keep up the good work and continue to ENDURE and BELIEVE. I am always pulling for you to do well.

 

Chipotle had some weakness early this week.....on days when the markets were booming. It gained back all the losses in one day.....yesterday. I have noticed some.....STRANGE STUFF.....in the media over the past five days.

First....I was wondering about the recent 3-4 day drop in CMG price....while the rest of the market was generally booming. So, I did some research to find out if anything was going on. As I was searching I came across a news article that had a posting date of two days prior. The subject was a food based illness outbreak impacting 8-10 Chipotle customers..

I was sure that was the current news reason for the drop in shares of CMG while the rest of the market was going up. So I started the process of posting the article and doing my usual BOLD of important content.

When I got to the very last paragraph of the article it was talking about the share price and an analyst maintaining their estimate of $600. That seemed very strange to me with the share price over $3000.

I looked back at when the article was posted....yes....two days ago. I looked at the date of the article......over two years ago. For some reason an article over two years old had been posted only two days prior as a "new" article. I have no doubt that many people and trading systems...just like I did...picked up that article as current news.

The second event I have noticed this week is....what appears to be a coordinated attack on the portion sizes at Chipotle. I have seen numerous news articles in minor news sites and papers attacking the portion size at Chipotle and claiming that the sizes are now smaller. The restaurant strongly DENIES that portion sizes have changed.

Are these two attacks related? Is this part of a market manipulation attempt. Is this a HIT on the company? I dont know but....I do find it interesting to see this sort of thing happening. I TRULY BELIEVE that these two events were responsible for a 3-4 day drop in the stock.

BUt...the big lesson is...you can not trust content on the internet.

This sort of...."STUFF"....is a big problem with AI based trading programs. Basically they trade news items and headlines. AND...the issue obviously becomes important when stories are based on rumor or speculation....or when a story is posted as NEW NEWS....but....is over two years old.

 

GREAT but hot today. Currently 92 degrees at 7:16PM.

 

So true.....unfortunately.

 

YES....RG. Houston was hit hard by a storm a few days ago. Over 100MPH winds that took out a lot of the electric infrastructure. fortunately here in Austin area we are about 160 miles from Houston. We have been having thunder storms lately with massive HAIL.....some times as big as a softball. One of my grand-kids had their cat totaled by hail a month ago. but we have been generally good.

 

YOU are probably right ALMX....welcome to the the thread....again.....good to see your posts.

It has been a very listless market in general lately. BUT....I do wonder how an old story from 2-3 years ago gets posted as a current story on a major financial site. Most likely incompetence or allowing some AI driven system to choose and post stories.

 

HERE is a little Sunday reading.......definately a big issue going forward for the general economy and especially the bond markets.

Soaring debt and deficits causing worry about threats to the economy and markets

https://www.cnbc.com/2024/05/19/soa...about-threats-to-the-economy-and-markets.html

"Key Points

• The federal IOU is now at $34.5 trillion, or about $11 trillion higher than where it stood in March 2020.
• Chatter has spilled into government and finance heavyweights, and has one prominent Wall Street firm wondering if costs associated with the debt pose a risk to the stock market rally.
• The CBO estimates that debt held by the public compared to GDP will rise to “an amount greater than at any point in the nation’s history.”
• Fed Chair Jerome Powell said recently that “this is something that elected people need to get their arms around sooner rather than later.”"

MY COMMENT

Of course NOTHING will happen other than more and more debt. At this point I think it is beyond fixing.

 

A lot of HYPE over the coming week and NVDA....here is the week to come.

Markets brace for Nvidia earnings: What to know this week

https://finance.yahoo.com/news/mark...arnings-what-to-know-this-week-130053537.html

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

"Stocks are once again ending a trading week having hit new records.

Signs of an inflation cooldown prompted markets to grow more optimistic about the prospect of Federal Reserve interest rate cuts and stocks rallied as a result, with all three major averages hitting record highs on Wednesday.

For the week, the Nasdaq Composite (^IXIC) rose more than 2% while the S&P 500 (^GSPC) popped more than 1.5%. The Dow Jones Industrial Average (^DJI) rose more than 1%, closing above 40,000 for the first time ever on Friday.

In the week ahead, highly anticipated earnings results from Nvidia (NVDA) are expected to be the key catalyst for markets. Results from Target (TGT), Palo Alto Networks (PANW), and Lowe's (LOW) will also be closely tracked by investors.

The week is expected to be quieter on the economic front, with updates on activity in the manufacturing and services sectors as well as the final reading of consumer sentiment for May on tap. Minutes from the Fed's May meeting are also expected on Wednesday afternoon.

Minute by minute

April's reading of the Consumer Price Index showed core prices, which strip out the more volatile costs of food and gas, rose 3.6% over last year — the lowest annual rise in three years. This prompted investors to price in two full interest rate cuts this year for the first time since early April.

The move brings the market closer in line with the Fed's projections of two or three interest rate cuts at some point this year. BMO Capital Markets chief investment strategist Brian Belski listed investors' alignment with the Fed on interest rate cuts as a reason supporting his call for the S&P 500 to end 2024 at 5,600, an increase of less than 7% from Friday's close.

For investors, the key question will be whether this bullish narrative is sustainable or if the market will once again jump ahead of the Fed as it did in early 2024 when investors priced in nearly seven interest rate cuts on the back of positive economic data. The first test will come on Wednesday with the release of minutes from the Federal Open Market Committee's May meeting, which will provide a deeper look at the discussion among officials.

"The minutes from the May FOMC meeting should sound more hawkish on the margin than Chair Powell's press conference," Bank of America US economist Michael Gapen wrote in a note to clients. "Though Powell signaled the bar for hikes is high and that standing pat is the proper response to disinflation stalling out, others on the committee were more concerned about whether policy was doing enough."

The bulls are on the run

Belski's year-end target bump was followed by another forecast raise on Friday. Deutsche Bank chief equity strategist Binky Chadha boosted his year-end target for the benchmark to 5,500 from 5,100. Chadha cited robust earnings growth and an improving macroeconomic outlook as reasons stocks could keep moving higher.

"We see the earnings cycle having plenty of legs," Chadha said. "While all the growth may not materialize this year, we see market confidence in a continued recovery rising by year end, supporting equity multiples."

Nvidia's big report

AI leader Nvidia is set to report earnings after the closing bell on Wednesday, capping off the reports from America's tech giants. Expectations are once again sky-high for the chipmaker. Analysts expect Nvidia grew earnings by more than 400% in the prior quarter while revenue increased 242%, per Bloomberg consensus data.

For the second quarter, analysts project earnings growth of more than 120% and nearly 100% revenue growth.

"We see enough room for NVDA to post FQ1E (April) revenue potentially as high as $26B (data center ~$22-23B) and potentially guide to ~$27-28B in total revenue (data center ~$25-26B) — both good enough to keep the stock biased higher, in our view," UBS analyst Timothy Arcuri wrote in a note to clients previewing the earnings release.

The stock is up more than 86% in 2024 and more than 200% over the past year since Nvidia kicked off the AI hype train with its blowout earnings report in May 2023. Given how Nvidia's stock has impacted other potential AI plays, and the broader market as a whole, all eyes will be on whether the company can once again live up to the hype.

"If [Nvidia] can continue their enviable, remarkable string of beating estimates, raising guidance, then beating the raised guidance next quarter, that means that the AI trade can and will proceed apace," Interactive Brokers chief strategist Steve Sosnick wrote in a research note on Thursday. "If there is even the slightest sign of weakness, however, much more than that stock alone will suffer."

The expansion of the AI trade

Nvida's updates on its emerging technology demand come at a crucial time for the overall AI story. Increasingly, new companies in sectors are being tabbed AI trades.

Just this past week, Dell shares rose about 10% as analysts from Morgan Stanley and Evercore ISI revealed bullish research on the company's AI prospects.

The AI trade has already been expanding beyond the popular names like Nvidia, Microsoft (MSFT), Alphabet (GOOGL, GOOG), and Meta (META). Energy and Utilities are two of the best performing sectors in the S&P 500 this year, both adding more than 13%. While strategists have pointed to a catch-up trade in Utilities (XLU), AI has also been a driver of enthusiasm. The same could be said for Energy (XLE).

Research from Goldman Sachs' equity strategy team led by David Kostin shows mentions of AI soared in the first quarter amid a "broadening of the AI trade." More than 66% of companies in the energy sector mentioned AI during their earnings calls this quarter, up from 19.1% last quarter.

JPMorgan Asset Management global market strategist Jack Manley said whether the AI story has legs "might be one of the more important questions that we have to ask."

"Is this AI stuff the real deal or is it a flash in the plan?" Manley told Yahoo Finance. "And I mean, frankly, the jury is still out on whether or not it will fundamentally transform the world."

He added, "If markets wake up to say 'Hey, maybe we got a little bit too excited about this and maybe we pulled forward some of these earnings just a little bit, and that's reflected in those valuations.' That's where I think you have the potential for a bit of a shaky road."

MY COMMENT

I dont like all the HYPE around the NVDA earnings. It is a great company and I am sure earnings will be HUGE....but out of control expectations often lead to short term dips. AND......out of control expectations can drag down....in the short term and even into the longer term....a really great company.

What I would like to see most as a shareholder is a....STOCK SPLIT. Many of these companies with high priced shares are missing out big time by not doing semi-regular stock splits....for as long as share prices are jumping. Stock splits back in the decade of the 1990's were a HUGE driver for MSFT.......and a great reward for shareholders.

As to the SP500......if my memory is right....at the start of 2024..... I was predicting a year end for the SP500 by December 31, 2024 of about 5600. I think thet put me at the very high end of the range of "professional" predictions. With the INDEX at 5300....my prediction is not looking too difficult to hit. Although......we are at a high right now....I never discount the potential for a correction some time over the next seven months. In fact....it is probably likely since corrections are simply normal short term market action.

 

Lori.....good for you. Keep up the good work. ALL TIME HIGH.......way to go, you.

Just keep at it....it is a lifelong process. Getting to that first $50,000 and $100,000 is the hardest part of the process. it seems like it takes forever....but it happens for everyone that hangs in there and trusts what they are doing. Once you get to that first $100,000....the size of the gains during the good times EXPLODES.

Unfortunately we do have a National Estate (inheritance) Tax in the USA. I believe the top rate is 40%. In addition many states also have a "state" inheritance tax.

I agree.....INSANITY.

 

AND....it begins:

Target to Lower Prices on 5,000 Basic Goods

https://www.newsmax.com/finance/streettalk/target-inflation-prices/2024/05/20/id/1165364/

"Target plans to cut prices on thousands of consumer basics this summer, from diapers to milk, as inflation cuts into household budgets and more Americans pay closer attention to their spending."


MY COMMENT

Companies have pushed the price increase envelope to the max. It is now going to quickly collapse as demand destruction snowballs and companies get into pricing battles.

Here in my area I have seen a good number of restaurants close recently.....they have little business. They thought they could just raise prices over, and over, and over. Well they lost their customers. The prices I am seeing now are simply UNJUSTIFIED......typical price for a burger and fries.......$14 to $18. RIDICULOUS.

Once this customer rebellion....by not showing up....snowballs, companies will be rushing to cut prices. It is going to happen....I can "feel" it. Our Target definately has much less cars in their parking lot lately. We drive by it every day....but....do not shop there. There is a reason for the recent GREAT Walmart earnings....which included more upper customers shopping there.