The Long Term Investor

I consider that I had a very GOOD day today in spite of losing a little money on my stocks. They all came back as the afternoon progressed. In the end I had a small loss....but....only two stocks in the red....AAPL, and NVDA.

I did lose out to the SP500 today by 0.12%.

Looking forward to a good close to the week tomorrow. At this point it has been a really good week.

 

The MIXED economic news of the day.....that no one will care about in a week.

U.S. adds a much-better-than-expected 272,000 jobs in May, but unemployment rate edges up to 4%

https://www.cnbc.com/2024/06/07/jobs-report-may-2024-us-job-gains-totaled-272000-in-may.html

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

"Key Points

• Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000.
• The unemployment rate rose to 4%, the first time it has breached that level since January 2022.
• Job gains were concentrated in health care, government, and leisure and hospitality, consistent with recent trends.
• Average hourly earnings were higher than expected as well, rising 0.4% on the month and 4.1% from a year ago.

The U.S. economy added far more jobs than expected in May, countering fears of a slowdown in the labor market and likely reducing the Federal Reserve’s impetus to lower interest rates.

Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000, the Labor Department’s Bureau of Labor Statistics reported Friday.

At the same time, the unemployment rate rose to 4%, the first time it has breached that level since January 2022. Economists had been expecting the rate to stay unchanged at 3.9% from April.

The increase came even though the labor force participation rate decreased to 62.5%, down 0.2 percentage point. The survey of households used to compute the unemployment rate showed that the level of people who reported holding jobs fell by 408,000.

“On the surface, [the report] was hot, but you’ve also got a bigger drop in household employment,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “For what it’s worth, that tends to be a more accurate signal when you’re at an inflection point in the economy. You can find weakness in the underlying numbers.”

A more encompassing unemployment figure that includes discouraged workers and those holding part-time jobs for economic reasons held steady at 7.4%.

The household survey also showed that full-time workers declined by 625,000, while those holding part-time positions increased by 286,000.

Job gains were concentrated in health care, government, and leisure and hospitality, consistent with recent trends. The three sectors respectively added 68,000, 43,000 and 42,000 positions. The three sectors accounted for more than half the gains.

Other significant growth areas came in professional, scientific and technical services (32,000), social assistance (15,000), and retail (13,000).

Regarding wages, average hourly earnings were higher than expected as well, rising 0.4% on the month and 4.1% from a year ago. The respective estimates were for increases of 0.3% and 3.9%.

Stock market futures lost ground while Treasury yields surged after the report.

“One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” said Seema Shah, chief global strategist at Principal Asset Management. “Not only has jobs growth exploded again, but wage growth has also surprised to the upside, both moving in the opposite direction to what the Fed needs to begin easing policy.”

Previous months’ reports saw small revisions: The March gain dropped to 310,000, down 5,000, while April’s saw a cut of 10,000 to 165,000.

The report comes with investors on edge over how long the Fed will hold its benchmark borrowing rate at the highest level in some 23 years. In recent weeks, policymakers have indicated a reluctance to cut anytime soon as inflation remains above the central bank’s 2% target.

The report was “certainly hawkish” from the Fed’s perspective, Sonders said, meaning that the data would make it less likely that the central bank will reduce rates anytime soon.

Following the jobs report, traders in the fed funds futures market reduced the possibility of a cut in September to about 56%, according to the CME Group’s FedWatch measure. That was down about 12 percentage points from Thursday. The market-implied probability of a second move lower in December fell to about a coin flip after being around 68% a day ago.

The Fed has not lowered rates since the early days of the Covid pandemic in 2020 and hiked 11 times between March 2022 and July 2023. The benchmark federal funds rate is currently targeted between 5.25%-5.5%."

MY COMMENT

In my view a little more negative information here for the economy than positive. BUT....that is not the mainstream view. full time employment dropped. The unemployment rate is up. Labor participation...what really matters....is down. Many of the jobs added are government jobs....which I dont consider relevant to the actual economy....the private economy. Discouraged and part time workers....stayed the same.

So.....WHATEVER.

 

I dont see much about this in the media anymore....the yield curve. Apparently no one cares.

Why the Longest-Ever Yield Curve Inversion Isn’t Troubling
Because it doesn’t appear to signal credit contraction like in past periods.

https://www.fisherinvestments.com/e...est-ever-yield-curve-inversion-isnt-troubling

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

"Yield curve inversions—when short-term interest rates top long—have a pretty reliable record of signaling forthcoming recessions. But this time, US yield curve inversion is staring down its second birthday with no recession in sight, leading many to question its predictive powers. While the subject is worth exploring, we think the discussion misses some key points for investors.

US 3-month yields have topped the 10-year since October 2022, a 20-month inversion that ranks as history’s longest. Yet the recession most expected around then hasn’t arrived.

Exhibit 1: Yield Curve Inversion Typically Signals Recession




Source: FactSet, as of 6/5/2024. 3-month and 10-year Treasury yields, 1/4/1954 – 6/5/2024.

We think this makes an important point super clear: Inversion isn’t a timing tool. 2022’s bear market occurred as the yield curve flattened, but this flattening didn’t say anything stocks weren’t already pricing in. Inversion roughly coincided with October 2022’s bear market low—and a new bull market beginning. So to the extent it signaled elevated recession risk, there was strong evidence stocks had already priced it. The inverted curve also got heaps of attention, likely sapping any surprise power. Stocks have since rallied throughout the long inversion—to record highs even.

So, why hasn’t yield curve inversion preceded recession (at least, so far) when it has done so many times before? Historically, inversions signaled credit contractions, which raise the risk of recessions. The spread between short and long rates usually reflects new lending’s profitability—banks’ net interest margin. As banks borrow short (paying interest on your deposits) and lend long (collecting interest on the loans they make), a narrowing spread would ordinarily make banks less eager to extend credit. That would mean less new capital to fuel investment.

But not this cycle. As the Fed hiked rates, bank deposit rates stayed ultra-low thanks to a deposit glut. Banks didn’t have to compete with higher rates. While that is changing to a degree, the average rate banks pay on savings deposits nationally has risen to all of 0.45%—their funding costs remain extremely low, far below what 3-month Treasury yields’ 5.37% implies. Meanwhile, benchmark 10-year Treasury yields currently stand at 4.28%—with banks’ loan rates far higher.[ii] For example, the prime loan rate (the reference rate for short-term business loans) is 8.5%, while the average 30-year fixed mortgage is 7.0%.[iii] No wonder, as Exhibit 2 shows, total bank credit keeps expanding, unlike 2009’s contraction.

Exhibit 2: Bank Lending Continues Making Record Highs




Source: Federal Reserve Bank of St. Louis, as of 6/5/2024.

Now, bank lending has slowed from over 12% y/y in 2022 to 2.3% through May.[iv] Commercial and industrial loans dipped negative on a year-over-year basis in October 2023 and are basically flat today. High rates have impacted demand in areas more reliant on bank lending. This helps explain real estate’s struggles, manufacturing’s downturn and the pullback in equipment investment. So while the inversion did presage some weakness, it wasn’t widespread enough to cause a recession.

We see a couple reasons for this. One, the inversion was widely discussed and dialed up recession expectations. A recession’s primary purpose, typically, is to squeeze excess from the economy. Companies usually get caught flat-footed and have to make severe cuts when trouble strikes. This time, businesses, seeing the inversion and universal recession forecasts, didn’t wait for concrete signs of trouble. They cut excess proactively to ride out anticipated lean times. We think their anticipation ended up mitigating the recession that might otherwise have forced them to cut back more severely. Meanwhile, growth sectors remained able to self-finance expansion, using their flush balance sheets to fund profitable projects even as they shrank more bloated business units.

However, just because inversion isn’t working now, doesn’t mean it won’t in the future. Primarily, we think it depends on how accurately the yield curve represents banks’ new loan profit margins and the impact that has on overall credit flowing through the economy. Even this time, a recession could strike if credit contracts. Again, inversion isn’t a timing tool. A lag this long would be unusual, and recession doesn’t look likely, but being mindful of the possibility is important.

We also see longer-term implications. Typically, the more coverage an indicator receives, the less effective it is—it gets too well known and priced in. According to Factiva, 2019’s and 2022’s inversions prompted more than twice 2006’s major financial press mentions.[v] People were on the lookout for inversion. That might not happen in the future, especially if it doesn’t work now. Many may conclude it is broken and move on.

This could give it more power in the future. We might be seeing the seeds of this now. Pundits are starting to suggest inversion’s lack of negative impact heralds a (new) new economy where America’s services sector is big and stable enough to overcome problems caused by an inverted yield curve in other credit-sensitive parts of the economy—rendering the yield curve an antique with no modern relevance. If that notion becomes more widespread, it could set investors up to dismiss future inversions, giving it surprise power once more.

At present—and properly understood—yield curve inversion remains benign. But this could change. In our view, that means investors also need to be aware of its broad misperceptions and how they diverge with actual credit conditions."

MY COMMENT

The discussion above is a perfect explanation why the BIG CAP STOCKS......are NOT in reality interest rate sensitive as we constantly hear in the media every time there is a little blip in the Ten Year yield.

This is REALITY:

"...growth sectors remained able to self-finance expansion, using their flush balance sheets to fund profitable projects even as they shrank more bloated business units."

 

A very VAGUE market today.

The....irrelevant economic data today is impacting the big averages.....and many stocks. BUT...the action today is not significant. It is just trader activity. I actually would not be surprised to see a positive close today. I dont see much enthusiasm for the negativity in the markets today.....it is just a mild knee jerk reaction.

BORING......YAWN.

 

WTF......is wrong with our government?

US prepares for antitrust clash with AI heavyweights Nvidia, OpenAI, Microsoft

https://finance.yahoo.com/news/us-p...eights-nvidia-openai-microsoft-190102310.html

WTF....why not....lets do everything we can to destroy, impair, harass, and harm the private companies that make us leaders in the world, give us national and international economic power, and drive our economy in every category.

The real reason for this....ALL THAT MONEY....sitting in these companies. The government wants to get their hands on it. This drives contributions to politicians......it drives money to lobbyists.....it drives money into the political and government system. Any fines or settlements represent BILLIONS to the government.....so......IT IS SIMPLY ONE BIG MONEY GRAB.

 

ACTUALLY.....nothing going on today. A drifting Friday. BUT....that is fine with me after the big gains earlier in the week.

 

I start the day from here with six of nine stocks in the GREEN. The RED stocks...NVDA, HD, and PLTR.

 

HEY....WOW....the SP500 has just turned GREEN. By a scintillating....hold onto your hats.....0.02%.

 

Not too many months ago this big pot of money was sitting at $6TRILLION....eventually a good portion of it will go somewhere. The big question....where will it go and when.

Stocks are about to hit a 'wall of money' that will drive the market to record highs in July, Goldman Sachs says

https://finance.yahoo.com/news/stocks-hit-wall-money-drive-221910509.html

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

• "A record $7.3 trillion in money market funds could soon be reinvested elsewhere, Goldman Sachs says.
  
  
• The bank's trading desk highlighted that bullish seasonals in July set the market up for further gains.
  
  
• "The bar for being short equities right now is very high given these upcoming flow and random market dynamics."
  

A "wall of money" is headed for the stock market this summer and will drive equities to record highs, according to a recent note from Goldman Sachs' trading desk.

Scott Rubner, a managing director at Goldman Sachs, highlighted in the note that a record $7.3 trillion is sitting in money market funds, and a large chunk of that is poised to flow into stocks.

"My hunch is that we will see some big money market outflows," Rubner said.

That could be especially true if the Federal Reserve starts to cut interest rates, which is expected to happen at the September Federal Open Market Committee meeting based on fed fund futures data.

If the Fed cuts rates, then the cash yield on money market funds should drop from its current level of about 5%. That could be the catalyst for investors with high levels of cash to seek other investment alternatives.

But Rubner said he thought a flood of cash was likely to hit the stock market at the start of July, as it represents the start of the third quarter and the start of the second half of the year.

That time of the year typically coincides with passive equity models buying stocks.

"New quarter (Q3), new half year (2H), this is when a wall of money comes into the equity market quickly," Rubner wrote. "~9 bps of new $$ gets put to work every July. On $29 trillion in assets, that is $26B in modeled July inflows."

The rush of new inflows that could hit the stock market in July would also align with what has become a historically bullish time of the year.

Rubner highlighted that the first 15 days of July have been the best two-week trading period of the year since 1928. The best trading days of the year occur in the first week of July, and the month of July on its own has been highly positive for stock prices.

"These stats are staggering for the NDX over the past 16 years. NDX has been positive for 16 straight July's with an average return of 4.64%," Rubner said of the Nasdaq 100.

It's a similar story for the S&P 500, which has been positive in July for nine straight years, with an average return of 3.66%.

With stocks already trading at records, the gains Rubner expects would send the stock market to fresh highs.

"The bar for being short equities right now is very high given these upcoming flow and random market dynamics," he said."

MY COMMENT

Sounds good to me and if it happens I will take it.

BUT....in my view much of this money is NOT stock market money. it is safe or short term money that has migrated to MM Funds due to the current high rates they are paying. I am not sure this money will default to stocks if the rates drop.

I also SEVERELY DOUBT the thesis above that this money is waiting for the start of the new quarter to rush into the markets.

BUT....if, lets say...only $2TRILLION of this money decides to come into the markets....it will still be a big boost to the markets.

A nice problem to have.....if it happens GREAT....if it does not happen......who cares, we are doing just fine without this money in the markets. A....win, win,.....either way. Especially for long term investors....who are not trying to figure out where money is headed quarter by quarter.

 

Sorry Strathmore.....with you being in a foreign country, and tax law involved, as well as foreign rules that apply to brokerage accounts and "in-kind transfers"......I DONT DARE TRY TO ANSWER YOUR QUESTION. You might just want to ask your broker.

 

OK....we are now there.....NVDA SPLIT TIME.....at least in about 30 minutes. Are people going to rush in and turn the stock GREEN for the day as we near the close......only the MAGIC EIGHT-BALL knows.

 

What started off for me as a medium to large loss today....ended with a FIZZLE. I had a small loss today....even though I only had two stocks in the GREEN....COST and AAPL. I lost out to the SP500 today by 0.02%.

the best thing for me....it was an AMAZING WEEK.

 

What a BEAUTIFUL week it was this week.....at least for "ME".

DOW year to date +2.87%
DOW five days +0.23%

SP500 year to date +12.74%
SP500 five days +0.94%

NASDAQ100 year to date +15.00%
NASDAQ100 five days +1.83%

NASDAQ year to date +16.03%
NASDAQ five days +1.59%

RUSSELL year to date +0.75%
RUSSELL five days (-2.61%)

Now for the good part. this week at the close today my entire portfolio was at YTD.....+39.48%. Last Friday at the close it was at YTD.....+33.24%. A great gain for me this week.

 

HAVE A GREAT WEEKEND EVERYONE.......those of us that own NVDA will see a much larger share balance on Monday. The bad news....the value of your position will not be and larger than now.

 

PLEASE......JUST TO REPEAT.

This thread IS NOT investing advice. I am NOT recommending that anyone follow or do what I am doing on here.

This thread is simply my INVESTING BLOG as a long term investor......NOT INVESTING ADVICE.....to anyone else. I post my moves......AFTER....they happen. This is just so others can see my personal journey as a long term investor.

In other words this thread is for....ENTERTAINMENT AND DISCUSSION ONLY.

I will say.....NO ONE.....should be taking or following any sort of investment talk or content on the internet. It is DANGEROUS. YOU have to decide based on your own situation what is right or wrong for YOU. NO ONE on the internet can know that.

 

I was doing some planing for the funds that my kid and their spouse will have to put in their brokerage accounts after their house sale closes on or before July 9.

I was surprised to see the NVDA split shares are already reflected in the various family accounts. Between my accounts, my siblings account, which I manage, and the two brokerage accounts of my kid and their spouse, which I manage, we now have about 12,000 shares. The majority are in my accounts and my siblings account.

The earliest shares that belong to me and my sibling were purchased in early to mid 2021. I have added shares many times since than to our accounts....but....the shares with the greatest gains that we have are all clustered between 800% and 900%. THAT GAIN IS OVER THREE YEARS for those shares.

As to the planing for my kids and spouses acccounts when we get those funds:

I am planing that we will have about $150,000 to be equally split between their two brokerage accounts (taxable). In each account I will put $25,000 into NVDA shares. The remaining $50,000 in each account will be split equally between....AAPL, MSFT, AMZN, CMG, COST and HD. This will bring the acccounts more in line with my Model Portfolio.

They will each continue to add $500 per month to the SP500 Index side of the accounts.....forever. Once these additional funds go into the two accounts, their TOTAL joint value will be about.....$650,000......at ages 39-42. With this amount of money in the two accounts and with the stocks that will be in the accounts....there should be some very HEFTY compounding going on over the next ten years....and over the rest of their work lives.

I really had to.....hound and harass....both of them to get started investing. They have now been investing for about 10 years. Now that they are seeing that what I was telling them has come true and now that they are seeing the big gains that a higher account value generates....I believe they are hooked for life.

ALTHOUGH....keep in mind......big account balances can generate big gains....but...also generate big losses, on paper, when the markets go down.

Over the past ten years my kid and their spouse have invested through some very NASTY markets, and very strange events like the pandemic, and they seem to have no problem handling the stress and psychology of BAD markets. SO....I am sure they will continue to invest for life....even after I am no longer handling their accounts.

At this point I consider that I have achieved my financial goal for them. Even if they dont invest another penny....with the amount that will be invested in their accounts after the house sale money goes in....their future will be secure.....since they have another 20-30 years of investing....minimum...ahead of them. PLUS they both are under an AMAZING government pension plan.

Of course my two kids and their spouses will eventually inherit all of the assets of myself and my sibling.

 

I will mention that ALL the accounts above are.....TAXABLE BROKERAGE ACCOUNTS....even my kid and their spouse. NONE of us have any sort of retirement account, 401K or IRA. ( Although the kids have their government pensions that are now vested, by the time they retire they will probably get between 90% and 100% of their final salary for life)

That is just fine with me. I intentionally used up my IRA (KEOGH rollover money) and my siblings IRA as soon as possible in our retirement financial planing. Because of that planing........ we are paying much less taxes in retirement than we would have otherwise.

PERSONALLY.....I have always had a taxable brokerage account over my lifetime. Even when I was working I would put $30,000 per year into my KEOGH account.....everything else.....ALL other savings and investing..... including my MSFT investing between 1990 and 2002.....was ALL in my taxable brokerage account. I very much liked it that way....I liked having free access and free use of my money before retirement.

 

This coming week on June 13....we will have the Elon Musk compensation package vote. Moving the state of incorporation to Texas will also be voted on.

It is interesting....but I am not a shareholder so I have no stake either way.