I touched on this issue the other day. Nvidia’s surge reveals a pitfall of passive investing: Morning Brief https://finance.yahoo.com/news/nvid...assive-investing-morning-brief-100128356.html (BOLD is my opinion OR what I consider important content) "Nvidia (NVDA) notched its 43rd record closing high on Tuesday, bringing its 2024 return close to 175%. Unfortunately, passive investors relying on mutual funds and ETFs as investment vehicles haven't been able to participate in all of these gains. Micron (MU), Qualcomm (QCOM), KLA Corp (KLAC), and Lam Research (LRCX) also closed at all-time highs on Tuesday, catapulting the broader S&P 500 Tech Index to its own record and bumping up its year-to-date return to an enviable 31%. But the closest investable match — the Technology Select Sector SPDR Fund (XLK) — is underperforming its tech sector benchmark by over 10 percentage points this year. And the issue arises from the very success of the largest tech names. The heart of passive investing is premised on managing risk through diversification. In theory, a diversified tech index is "safer" than one in which three stocks dominate the index. But over the last four years, Apple (AAPL), Microsoft (MSFT), and Nvidia have so thoroughly trounced the rest of the market that ETFs are bumping up against rules and regulations that limit the weight of individual stocks in funds. In theory, each of these three behemoths should be weighted at just over 20% of the XLK fund — if it matched the benchmark. However, many investors (including this author), were recently surprised to learn that Nvidia only comprises 5.9% of the ETF. Technology Select Sector SPDR Fund (XLK) expected to rebalance June 21 This state of affairs will soon change — drastically. With it, however, will arise another complication: Apple's weight dropping sharply. After the close Friday, the XLK ETF will be rebalanced to drop Apple's 22% share down to 4.5% and increase Nvidia's 5.9% share up to 21.1%, based on Bloomberg estimates. All of this stems from Great Depression-era investor protection laws, which require that indexes limit the concentration of individual stocks to earn the label "diversified." Investors who are fond of reading prospectuses might enjoy the wonky legalese that explains the need for these changes as expressed in this FAQ and corresponding index methodology published by S&P Dow Jones Indices. Briefly stated, there are four companies — Nvidia, Apple, Microsoft, and Broadcom — that overrun the critical 4.8% threshold for individual names in a diversified index. And because they collectively exceed 50% of the entire index by weight, the weights of the smallest members are reduced according to a formula until all of the legal thresholds are respected. All told, Friday's rebalance should force $12.7 billion in Apple stock to be sold and $11 billion of Nvidia to be bought. That's close to the dollar amount of Apple shares that trade any given day, and about one-quarter of the dollar amount that Nvidia trades daily. In other words, these are material amounts. Fortunately for investors, these are highly liquid stocks, and the investment community will have had a full week to digest the scenario by the time the rebalancing goes into effect Friday. Of course, there are plenty of companies not in the trillion-dollar club — and companies that aren't exactly AI plays — that have rewarded investors handsomely this year. Dow component Walmart (WMT) is up nearly 30%. GameStop (GME) is up 40%. And Abercrombie & Fitch (ANF) stock has returned a whopping 110% this year. But the rebalance does raise the issue of an overlooked risk for the passive investing strategy preferred by the masses, which is that they may miss out when only a few names are carrying the lot." MY COMMENT Probably the greatest issue for any INDEX investor is......how is the Index run and calculated and structured. Other big issues are fees and is it an ETF.
I considered not even posting this since I feel this sort of economic data is irrelevant and meaningless. BUT....for those that care....here is the economic release of today. US weekly jobless claims fell in latest week https://finance.yahoo.com/news/us-weekly-jobless-claims-fell-124621602.html MY COMMENT WEEKLY data like this is in my view....WORTHLESS. Even over the longer term it is highly unreliable and constantly revised up and down. NOT something I care about.
I saw this story earlier today. I figured it would cause a BIG jump for SMCI and DELL. Super Micro, Dell shares jump as Elon Musk calls them suppliers to xAI supercomputer project https://www.cnbc.com/2024/06/20/sup...m-suppliers-to-xai-supercomputer-project.html MY COMMENT Not as big as I thought....SMCI up a little over 5%.....DELL up about 0.42%.
LOL.....I see the NASDAQ has just turned RED. BUT....I expect a good GREEN close for both the SP500 and the NASDAQ today. I know I am in the green at this moment with....NVDA, AMZN, GOOGL, HD and PLTR.....all being in the green for me so far today.
I will soon be heading over to my kids old house. They have a sale pending on that house and as part of the deal we need to have an electrician "bond" the gas line. SO....I will be siting at the house waiting for the electrician to arrive some time between 12:00 and 5:00. It takes me about an hour to drive to the house. We got all their art hung at their new house the other day and they are pretty much moved in. They can even park two cars in the garage....it is not full of boxes and "stuff" from the move. Last night I sat up till about 1:00 drafting the Promissory Note and Deed Of Trust for their new house. I think I have all the format and content requirements completed for the County they live in. I am very pleased with how those documents came together.....and...glad to have them out of the way. Everyone involved with the financing of the new house will sign by the end of June. I will be the Trustee of the Deed of trust. LETS HAVE A GOOD DAY EVERYONE.....KEEP THESE MARKETS MOVING ON UP.
I had a nice FAT loss today....only two stocks up at the close.....AMZN and GOOGL. I was past due for a little red blip anyway with all the gains lately....so no big deal. I also lost out to the SP500 by 1.74% today.
My worst stock today was CHIPOTLE. The poor company was down by (-6.22%) today. I was wondering why and driving home listening to business radio I heard there was an....AVOCADO and MANGO....crises in Mexico. I guess there is an issue with one of the drug cartels making a threat at the produce inspectors in the part of Mexico where all the Avocado's and Mango's that come to the USA are produced. So....they shut down the inspection system for those items. This has happened in the past and only lasted a few days. Fruit that has already been inspected will still ship. This is a great example of how on top of things the professional traders are......or...the AI trading platforms. Interesting....but I do not expect this to be much of a lingering issue going forward....perhaps an issue for a few days to a week or so. Until I heard this on the radio I could not find any reason for CMG to be down. LOL....the life of a long term investor in a short term world....where a drug cartel can impact an American companies stock price.....briefly..... by causing a shut down of the Mexican fruit inspection system for a few days. WOW.
The GUTS of long term investing. Quiet Compounding https://collabfund.com/blog/quiet-compounding/ (BOLD is my opinion OR what I consider important content) "“Nature is not in a hurry, yet everything is accomplished,” said Chinese philosopher Lao Tzu. Giant sequoias, advanced organisms, towering mountains – it builds the most jaw-dropping features of the universe. And it does so silently, where growth is almost never visible right now but staggering over long periods of time. It’s quiet compounding, and it’s a wonder to see. I like the idea of quietly compounding your money. Just like in nature, it’s where you’ll find the most impressive results. Every few years you hear a story of a country bumpkin with no education and a low-wage job who managed to save and compound tens of millions of dollars. The story is always the same: They just quietly saved and invested for decades. They never bragged, never flaunted, never compared themselves to others or worried that they trailed their benchmark last quarter. They just quiety compounded. Their entire financial universe was contained to the walls of their home, which allowed them to play their own game and be guided by nothing other than their own goals. That was their superpower. It was actually their only financial skill, but it’s the most powerful one of all. Imagine if, after your first date with a partner, you had to make every phone call, every text, every conversation with that person public on social media. Or even just with a small group of friends and family. You know what would happen: People would tell you you’re doing this wrong, you’re doing that too much, you should say more of this and less of that, on and on. You’d be so embarrassed, nervous, and influenced by other people’s goals and different personalities that you wouldn’t be you. None of the relationships would work. Money is similar. People become so nervous about what other people think of their lifestyle and investing decisions that they end up doing two things: Performing for others, and copying a strategy that might work for someone else but isn’t right for you. I try to keep in mind that there are two ways to use money. One is as a tool to live a better life. The other is as a yardstick of success to measure yourself against other people. The first is quiet and personal, the second is loud and performative. It’s so obvious which leads to a happier life. Quiet compounding means four things to me: 1. An emphasis on internal vs. external benchmarks. Always asking, “Would I be happy with this result if no one other than me and my family could see it, and I didn’t compare the result to the appearance of other people’s success?” It’s impossible to win the social-comparison game because there’s always someone getting richer faster than you. Once you stop playing the game your attention instantly shifts internally, to what makes you and your family happy and fulfilled. It makes it so much easier to enjoy your money, regardless of how you choose to spend and invest it. 2. An acceptance of how different people are, and a realization that what works for me might not work for you and vice versa. Christopher Morley said, “There is only one success – to be able to spend your life in your own way.” A lot of financial mistakes come from trying to copy people who are different from you. So be careful who you seek advice from, be careful who you admire, and even be careful who you socialize with. When you do things quietly you’re less susceptible to people with different goals and personalities than you telling you you’re doing it wrong. 3. A focus on independence over social dunking. Once you do things quietly you become selfish in the best way – using money to improve your life more than you try to influence other people’s perception of your life. I’d rather wake up and be able to do anything I want, with whom I want, for as long as I want, than I would try to impress you with a nice car. 4. A focus on long-term endurance over short-term comparison. A lot of people want to be long-term investors but struggle to actually do it. One reason is they get caught up in comparison – comparison to peers, benchmarks, and wondering what other people will think of you if they find out you lost money in the last six months. Long-term investing is about being able to absorb manageable damage; if you can’t do that, you’re pushed into the much harder trick of attempting to avoid short-term volatility. You’re only durable when you care more about surviving volatility than you do looking dumb for getting hit by it in the first place. Instead of trying to look smarter than everyone else, you make a quiet bet that things will slowly get better over time. You’re not in a hurry, yet everything is accomplished." MY COMMENT The above is right on. First.....it is compounding that brings the big gains and the power of long term investing. Second.......the luxury of "time" as an investor erases all mistakes and turns the ordinary into the spectacular. Third....the psychology of what and why you do what you do....is critical.
This is just a symptom of the FACT that people are on the edge of PRICE REBELLION. Especially in the restaurant business....and....in the small business world. Business....big and small.....is waking up to the FACT that people are becoming extremely price conscious. if you want to stay in business.....if you want to maintain market share......price cuts are coming. People are on the verge of a price revolution....they have had it. We are seeing all the big retail stores cutting prices. We are seeing the entire fast food industry cutting prices. We are seeing a sea-change happening in the business world......starting right now. AND....it WILL pick up and snowball. McDonald’s $5 Value Meal Intensifies a Fast Food Price War https://finance.yahoo.com/news/mcdonald-5-value-meal-intensifies-105802707.html
I will be AWOL for most of the day today. I will be leaving about two hours into the market day for a three day art conference. I will not be able to log into my account at the close today since I NEVER long in to bank or brokerage accounts when on hotel WiFi. SO.....I will be counting on you all to make sure I get a good close today and make some money.
A story I mentioned yesterday that......is a short term impact on CMG. U.S. suspended avocado inspections in Mexico’s biggest exporter of the fruit because 2 inspectors were assaulted and held captive https://fortune.com/2024/06/19/us-s...-mexico-biggest-exporter-2-assaulted-captive/ This has happened in the not too distant past.....February. On that occasion the stoppage only lasted a few days. An article from Feb 15, 2024. Chipotle on verge of avocado crisis after US halts imports from Mexico https://nypost.com/2022/02/15/chipo...challenge-after-us-halts-imports-from-mexico/ NO.....I dont expect this issue to last for long.....it is just one of those "trader story-lines" that impact the very short term.
Poor CMG. They are on the verge of one of the greatest stock splits in history and are putting up EXTREMELY GOOD earnings......and.....it is being overshadowed by a social media hate campaign regarding portion size and now Mexican cartel threats. BROTHER..... I DO still like the stock. In fact when I get the funds from my kids house sale I will be buying more shares of CMG in her and her spouses accounts. I hope to have those funds within about two weeks. They have all the same stocks as my Portfolio Model except for PLTR. When the funds clear I expect that I will be putting $70,000 into each account and will buy about $12,000 of NVDA and about $8000 of the other seven stocks.......GOOGL, MSFT, AMZN, COST, HD, CMG, and AAPL......in each of the two accounts. I strongly believe in al these companies. I am not putting any of these new funds into their SP500 Index ETF since they are making monthly additions to the ETF in the amount of $500 each and I need to catch up the stock portion of the accounts.
Ive been a couple times in USA but never tryed CMG, Im curious I confess. I think they just opened in UK. Maybe next time...
I am sure I had a down day on Friday even though I can not access my account. I am at an art conference......out of town this weekend......and it is my policy NOT to ever access my brokerage accounts unless I am on my home WIFI. For me it was like two weeks in one......the first two days of the week were UP big for me. Than.......we had a day off on Wednesday and it looks like the markets went out and partied all day and night and came back hungover. On Thursday and Friday the markets and my accounts were down. I suspect that for the week as a whole I did have a net gain. I will check when I get home on Sunday evening.
CHINA....what an economic and business JOKE. Here we have the worlds most brutal communist dictatorship.....where ALL business is subject to the total control of the communist government. Where.....investors "PRETEND" that the Chinese companies are actual independent businesses. Where.....outside, non-Chinese investors, also "PRETEND" that they own shares in the Chinese companies when they do not and can not, under Chinese law. Where....investors "PRETEND" that any of the financial data and results provided by the Chinese company is valid or accurate. China Earnings Pain Erodes Optimism Over Stock Market Rebound https://finance.yahoo.com/news/china-earnings-pain-erodes-optimism-000000711.html (BOLD is my opinion OR what I consider important content) "(Bloomberg) — Investors in Chinese stocks are losing patience as a long-awaited earnings recovery fails to come through and a rally unravels. Earnings estimates on key Chinese gauges have been slashed by the most in Asia this year as a deepening housing slump and sluggish retail sales hurt confidence. Stocks have lost momentum following a mid-May peak, with the MSCI China Index down more than 8%. “We’ve now seen 11 straight quarters of earnings misses for MSCI China and the analyst consensus hasn’t really gotten to grips with just how weak the underlying growth environment is in China,” Jonathan Garner, chief Asia equity strategist for Morgan Stanley, said Thursday. “You have to be selective to be involved in China. There’s also more competition going on, particularly in sectors like e-commerce.” Optimism that corporate performance will improve has been central to a months-long bull run earlier this year, with global funds tip-toeing back into the world’s second-biggest stock market. The recent slide is bringing back grim memories of the past years, when rebounds were soon out-shadowed by selloffs as risks from geopolitical tensions to regulatory crackdowns resurfaced. The Shanghai Composite Index and the CSI 300 Index have each seen their consensus earnings estimates drop by more than 6% this year, compared to an increase of 1.6% for MSCI’s Asia gauge and even higher raises for benchmarks in India and Japan, according to data compiled by Bloomberg. Earnings results for the members of the MSCI China Index missed the aggregate estimate by about 3.5% in the first three months of the year, while those for onshore stocks displayed a similar trend, another set of data showed. As the recovery falters, foreigners are back to selling. Overseas investors sold onshore stocks for nine straight days through Thursday, unloading the equivalent of more than $5 billion in the longest stretch of withdrawal since August 2023. Investors are reverting to “a wait-and-watch approach as allocations dip into underweight territory again,” according to the latest Asia fund managers survey by Bank of America Corp. “The frustration of having been whipsawed one time too many has molded into a structural bearishness toward the asset class,” strategists including Ritesh Samadhiya wrote in a June 18 report. The survey showed money mangers are net 6% underweight Chinese stocks, down from a neutral position in May. While Chinese investors are used to the market’s vagaries, some have been betting this time would be different as Beijing unleashed a swathe of market-supportive policies, including a property rescue package. That support, along with earnings recovery hopes, helped draw rare buy calls from strategists at UBS Group AG and Societe Generale SA, and prompted a U-turn from once-bearish money managers including veteran Mark Mobius. As the slide extends, with the CSI 300 down for a fifth week, doubts are creeping back in. Adding to worries is weak data. China’s home prices fell at a faster pace in May, and the country’s biggest internet firms are resorting to massive discounts to lure customers during the “618” shopping festival. In its portfolio update at the end of May, T. Rowe Price turned overweight on emerging market equities excluding China but kept the nation as underweight, saying the stimulus so far is too incremental to reflate the market. Optimists are pinning their hopes on the third plenum in July, one of the country’s most important political events, where top leaders outline long-term economic objectives and telegraph policy shifts. The MSCI China Index “will trade better heading into July and August,” Wendy Liu, an equity strategist for JPMorgan Chase & Co, wrote this week. She cited the third plenum and continued buybacks as among the reasons. The risk is that if the third plenum’s outcome disappoints, the dominant view over Chinese stocks may turn decisively downbeat amid a lack of catalysts. What analysts expect to be delivered in terms of earnings over the next two years “can only be a miracle,” CLSA’s Chief Equity Strategist Alexander Redman said in a media briefing in Jakarta earlier this month. Investors should maintain benchmark weight on Chinese stocks as their consensus earnings estimates seem too optimistic, he added." MY COMMENT What do they say about....a fool and their money? With all the GREAT companies in the USA and the EU....why in the world would I ever want to own anything from China. That entire country and every business in the country are under the control of the Chinese dictatorship which is simply....ONE HUGE BLACK SWAN. It is bad enough that so many of "our" companies have allowed China to steal their tech and have tied themselves to China. I will NEVER own a Chinese company.......although....I should say "PRETEND" to own a Chinese company.
YES....it has been an EPIC run for stocks. BUT.....I really do not care about market sell-offs or even corrections. These events are simply NORMAL market events. I find it INSANE that when NVDA drops for one day on Thursday I was seeing headlines about the NVDA....."Sell Off". Being a long term investor I do not care about such foolishness. I am certainly not going to get all worried about a 2% drop...or even a 5% drop....or....even a correction (10% drop). I see those events as simply normal market action.....and often..... times of market consolidation that lead to, and establish, the next leg UP for the bull market. The stock market is in its longest stretch without a 2% sell-off since the financial crisis https://www.cnbc.com/2024/06/21/sto...cent-sell-off-since-the-financial-crisis.html Key Information The S&P 500 is currently at 377 days with no 2.05% or greater sell-off. This is the longest stretch for the benchmark since the "great financial crisis", (whatever that is). Investors continue to buy into big cap tech stocks, like Nvidia, continuing to bet that artificial intelligence will boost profits.
YES....those of us that have awareness of NVDA and own the stock are in our own little bubble. Out in the real world.....this is NOT a day to day topic....and...the company is little known. Nvidia remains a little-known brand despite briefly passing Apple, Microsoft in market cap https://www.cnbc.com/2024/06/22/nvidia-is-little-known-despite-topping-3-trillion-in-market-cap.html (BOLD is my opinion OR what I consider important content) "Key Points Chipmaker Nvidia became the most valuable publicly traded U.S. company for a period this week, topping Apple and Microsoft. However, Nvidia is nowhere to be found on the list of best-known brands, while tech peers Apple, Microsoft, Amazon and Google are at the top. Nvidia’s rapid ascent has been powered by demand for artificial intelligence chips largely from a handful of very big corporate buyers. Apple, Microsoft, Amazon and Googlewere the four leading global brands at the end of 2023, according to consulting firm Interbrand. They’re are also four of the world’s five most valuable companies. The other is Nvidia, which for a time this week, surpassed Microsoft to become the largest company in the world by market cap. But despite its $3.1 trillion valuation (it reached $3.3 trillion before a two-day slide), Nvidia doesn’t even crack the top 100 most iconic names on Interbrand’s most recent list, which is populated by such companies as McDonald’s, Starbucks, Disney and Netflix. Nvidia’s historic rise in valuation — the stock has climbed almost ninefold since the end of 2022 — has been driven almost entirely by demand for its graphics processing units (GPUs) that are at the heart of the boom in generative artificial intelligence and, more broadly, by the hype over AI. Nvidia has over 80% of the market for chips used to train and deploy AI software like ChatGPT. A handful of huge tech companies are the primary buyers of its chips. The speed of Nvidia’s ascent and its relative lack of contact with consumers along the way combines to put the 31-year-old company’s brand recognition on Main Street far behind its allure on Wall Street. No. 100 on Interbrand’s list for 2023 is Japanese camera maker Canon, with Dutch brewer Heineken at No. 99. “As a product company recently moving onto a global stage, Nvidia has not had time, nor has it dedicated resources, to change its role of brand and strengthen its brand to protect future revenue,” Greg Silverman, Interbrand’s global director of brand economics, said in an email. The risk for Nvidia, Silverman added, is that its “weak brand strength will limit how valuable it will be, despite its market cap heights.” A spokesperson for Nvidia declined to comment. Nvidia’s annual revenue growth has exceeded 200% in each of the past three quarters. For fiscal 2025, revenue is expected to almost double from a year earlier to over $120 billion, according to LSEG. The company’s data center GPUs, which made up 85% of sales in the most recent quarter, are installed in massive facilities, and typically require a team of expensive data science and supercomputing experts to configure them to efficiently create AI software. By contrast, Apple, ranked No. 1 by Interbrand, makes the vast majority of its money by selling iPhones and other devices to consumers across the globe. Microsoft, ranked second, is an enterprise sales giant, but is ubiquitously known for its Windows and Office software. Third-ranked Amazon strives to be consumers’ everything store, and No. 4 Google is, for many people, the front door to the internet. Rounding out Interbrand’s top 10 are South Korean electronics giant Samsung, along with three car companies (Toyota, Mercedes-Benz and BMW), Coca-Cola and Nike. Further down the list, at No. 24, is Nvidia rival Intel, which is best known for making the processor at the heart of laptops and PCs and for its long-running “Intel Inside” advertising campaign. Even Hewlett Packard Enterprise, a company that builds servers, made the list at No. 91. Gamers love it However, a competing survey shows that Nvidia’s brand value is catching up to that of its peers. In a ranking of the 100 most valuable global brands published this month by Kantar BrandZ, Nvidia landed at No. 6, leaping 18 places from its prior survey. The brand’s overall valued jumped 178% in a year to an estimate of about $202 billion. Kantar surveys enterprise buyers to evaluate brands that primarily sell to other businesses to come up with a total estimate of brand value. “Nvidia is pound for pound as relevant and meaningful to that B2B buyer that’s looking to make big, large purchases in-house for their company as Apple is to the consumer who’s buying an iPad or a Mac,” Marc Glovsky, senior brand strategist at Kantar, told CNBC. And while Nvidia may not be a name known to your parents — or your kids — it does have resonance in a particular corner of the consumer world. Just ask your hard-core gaming buddy. When Nvidia was founded in 1991, AI was a nascent field. The company’s primary focus was on designing chips that could draw digital triangles quickly, a basic capability that led to a huge expansion in 3D games. For years, Nvidia, and its GeForce brand and green logo were well known to the type of people who tweaked their computers to run the most advanced games. Nvidia provides the chips for the Nintendo Switch console, which has shipped over 140 million units around the world. Unlike Intel, Nvidia never put its name in front of consumers with flashy ad campaigns. And gaming is now just a nice side business for chipmaker. In the latest quarter, it accounted for $2.6 billion of revenue, or 10% of total sales, rising 18% year over year. When it comes to Nvidia’s most important products, companies and institutions vying for its AI chips have to go through an extensive quoting and sales process, often through a computer-equipment company, like Dell or HPE. Those vendors sell complete systems, including memory, a central processor and other parts. Even experts who want to train AI models are more likely to rent Nvidia access through a cloud provider than build their own server clusters. Still, Nvidia’s name recognition is rapidly increasing. Among retail investors, Nvidia has emerged as the most widely held stock, according to data collected and published last month by Vanda Research. And while the name didn’t make Interbrand’s top 100 list for 2023, the firm’s data shows its brand awareness quadrupled in the past 12 months, which will help when it’s time for the next ranking, Silverman said. Maybe by then people will know how to say its name, a topic that’d been the source of debate on obscure gaming forums. The company pronounces it en-VID-ia." MY COMMENT No doubt this company is very well known in the investor community.......even if the public has no recognition of them. I am happy for them to remain unknown for as long as possible. I also prefer for their financials to speak for them....rather than PR driven name recognition.
An exhausting day for me today at my art symposium. I spent all day going in and out so I could be on the phone with my kid, their spouse, the buyers realtor, etc, etc, etc. We have been pushed by the buyers to do an early close next week. It was originally set for July 9. Finally everything is in place and everyone is lined up. Now the buyers realtor has to call the title company first thing Monday to make sure my kid and their spouse can come in on Tuesday afternoon and sign.
I got home a while ago and had a chance to check my results for last week. At the close on Friday I was a, year to date, for my entire portfolio.......+45.06%. Last Friday I was at, year to date, for my entire portfolio.....+46.75%. So I had a little bit of a loss for the week. We start the last week of the second quarter and last week of the first half of the year....tomorrow. MOVING ON UP....to the second half of the year.
