The Long Term Investor

Flying in the face of the rotation story line today......the RUSSELL 2000 is currently DOWN by 0.50% today. At the same time the SP500 and NASDAQ are both DOWN today. AND....the gains in the DOW are minimal.

Looks like a simple market drop.

At least the Ten Year Treasury is down at 4.18%....even though it is up a bit today.

 

At least I have ONE lonely stock up today.....HD. On a day like this I am happy to have one. I will take that as my early....VICTORY....of the day.

 

I was just listening to financial business TV and heard a statement that is so true. To expand on what I heard:

DO NOT change your allocation....your portfolio....your investment plan.......based on tweets. OR.....daily financial news content and DRAMA. Or.....day to day short term trader behavior. Leave the INSANITY to the "professionals".....where it belongs.

Of course this in NOT investing advice to anyone else.....simply reinforcement to myself. That is a primary way that I use this site to support my investment thinking. The simple....."physical"...... act of typing and posting something on here....reinforces....my investing behavior.

 

The SAD tale of the markets today. The good news....this is the sort of 1 to 2 day stories that are sensationalized and have little staying power.

Nvidia, ASML, and TSMC stocks are getting hammered — here's why

https://finance.yahoo.com/news/nvid...re-getting-hammered--heres-why-165341898.html

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

"Chip stocks Nvidia (NVDA), Taiwan Semiconductor Manufacturing (TSM), and ASML (ASML) have all soared this year thanks to investor bets on the artificial intelligence boom. On Wednesday, their momentum came to a screeching halt.

The three stocks were down more than 5% in midday trading on Wednesday for reasons ranging from investor concern over export restrictions to a broader rotation out of tech stocks.

One headwind that emerged was the potential for tighter restrictions on exports of semiconductor technology to China.

Bloomberg reported the Biden administration is considering implementing a more severe curb involving controls on foreign-manufactured products that use even the smallest amount of American technology.

Current restrictions have already impacted US-based companies’ ability to sell to China. Nvidia sales to China decreased as a percentage of total data center revenue from 19% in fiscal year 2023 to 14% in fiscal year 2024.

ASML stock saw the steepest decline on Wednesday, falling as much as 11%.

Shares of the Netherlands-based chip equipment maker were also pressured following its third quarter guidance.

While ASML beat its second quarter top- and bottom-line expectations, its revenue forecast for the current quarter came in shy of the consensus analyst estimate.

The company also said it expects quarterly gross margin in the range of 50% to 51% versus Wall Street expectations of 51.1%.

Also dragging down chip stocks were comments from former president Donald Trump, who said Taiwan "should pay" the US for protection against any aggression from China.

“You know, we’re no different than an insurance company. Taiwan doesn’t give us anything,” Trump told Bloomberg Businessweek in an interview published on Tuesday.

He also said Taiwan took "about 100%" of the US chip business.

Trump's comments sent shares of chip manufacturing and design giant TSMC plummeting more than 7% on Wednesday.

Many chipmakers, including Nvidia, depend on Tawain for manufacturing. The island located east of China is a major semiconductor hub with roughly 92% of the world’s most advanced chipmaking capacity, according to the US International Trade Commission.

It's worth noting shares of semiconductor companies Intel (INTC) and GlobalFoundries (GFS) were up during the session. Both companies are seen beneficiaries of the Biden administration's push to onshore chip production to the US.

The semis sell-off comes as investors have recently rotated out of big-cap names into small-cap stocks.

The rotation out technology began last week after the latest inflation print gave investors more optimism that the Federal Reserve would start cutting rates in September.

The Russell 2000 (^RUT) outperformed large-cap stocks on the Nasdaq 100 (^NDX) for five straight days as of Tuesday's close.

On Wednesday the small-cap index was down more than 1% while the tech-heavy Nasdaq 100 was down more than 2%."

MY COMMENT

This has NOTHING to do with any rotation....real or fantasy. In fact the RUSSELL 2000 is DOWN today by about 0.75%. Not exactly a rotation to small caps today. This is pure and simple.....news headline......momentum trading....by....AI TRADING PLATFORMS.

YES.....the usual suspects...the big Hedge Funds, the big investment banks, and the professional Wall Street trading shops. We are stuck with them....but these people and their machines....create more turmoil and noise in the markets than anyone else. In fact their obvious.......news headline trading...... creates momentum turmoil for all actual investors. It totally DISTORTS the short term markets.

AND....for the most part it is totally unproductive to anyone other than the traders.....it is simply short term "stuff".

 

I just finally got a chance to check out my account. HEY.......drum roll please......I actually had a stock UP today....good old HD. Every other one of my nine stocks was red.....BUMMER.

I also lost out to the SP500 today by 2.27%. No doubt I am going to eat up 3-5% of my HUGE year to date gains this week.

 

We are now seeing this sort of market drop on a regular basis.

About once or twice per month we will have a day when the bottom suddenly falls out of the markets. It is often some day when there is a news headline or event that becomes the catalyst for a HUGE market drop.

AND....the event often turns out to be a single day event. More often than not, the next day, is a big day to the UP-side....or....at least a very good green day.

There is obviously something causing these extreme volatility days. Something structural to the markets now.....that for some reason......did not happen in the past.

As long as it is a random day a few times a month....no problem. BUT...if this becomes more routine....someone needs to do a very deep dive into the AI TRADING SYSTEMS that are operating and being controlled by the Hedge Funds and the professional traders.

Case in point.....the drop today.......and the fact that ALL the futures are now solidly in thee green for tomorrow. Not that I believe the futures. It will be interesting to see if the little retail traders come in and save the markets tomorrow.......by buying...... as they usually do when there is a big drop.

 

The market today....in case you missed it.

Tech stocks drubbed as Nasdaq sinks 2.7%, worst day since 2022

https://finance.yahoo.com/news/stoc...-sinks-27-worst-day-since-2022-152223807.html

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

"US stocks were mixed Wednesday, with the Nasdaq dropping sharply as techs came under dual pressure from worries about US export curbs on China and Donald Trump's stance on Taiwan. The blue-chip Dow, meanwhile, quietly closed at another record high.

The tech-heavy Nasdaq Composite (^IXIC) sank more than 2.7%, marking the index's worst single-day decline since December 2022. The S&P 500 (^GSPC) fell more than 1.3%. Meanwhile, the Dow Jones Industrial Average (^DJI) rose about 0.6% to close at 41,198, the index's first close above 41,000 on record.

United Healthcare (UNH) shares rose more than 4%, extending a rally from Tuesday, while Johnson & Johnson (JNJ) popped more than 3% to lead the Dow higher.

Tech stocks pulled back as concerns about risks to bigger names eclipse the high hopes for interest-rate cuts that had fueled a rally in recent days. Those worries weighed on heavyweights whose AI-fueled gains have helped propel the S&P 500 to fresh record highs this year, with chipmaker Nvidia (NVDA) down more than 6%.

The Biden administration has told allies it's looking at imposing tougher restrictions on companies still making advanced chip technology available to China despite existing export curbs, Bloomberg reported. Shares of ASML (ASML, ASML.AS), cited as a potential target, dropped over 12% even after the Dutch chip gear maker posted solid quarterly earnings.

Meanwhile, the Republican nominee Trump questioned US defense support for Taiwan in a Bloomberg interview, suggesting the island claimed by China should pay for US protection. Chipmaker TSMC's (TSM) shares fell nearly 8%."

MY COMMENT

I sit BEMUSED and do nothing. What is there to do? There is nothing Fundamental about today. It was a day when the specific business and their potential results going forward did not matter.

 

MORE good news for the FED and rate cuts.

Jobless claims hit highest level since August

https://finance.yahoo.com/news/jobless-claims-hit-highest-level-since-august-141051604.html

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

"Weekly jobless claims rose more than expected last week in the latest sign of a cooling labor market.

New data from the Department of Labor showed 243,000 initial jobless claims were filed in the week ending July 13, up from 222,000 the week prior and above the 229,000 economists had expected. This tied with a weekly jobless claims reading from June for the highest level of weekly filings since August 2023.

Meanwhile, the number of continuing applications for unemployment benefits hit its highest level since November 2021, with nearly 1.87 million claims filed in the week ending July 6, up from 1.85 the week prior.

Jefferies US economist Thomas Simons reasoned that part of the uptick in weekly claims could've been caused by Hurricane Beryl displacing workers. Still, Simons noted that the trend in recent weeks for jobless claims has reflected more cracks emerging in the labor market.

"The data of the past few weeks have been signaling incremental labor market weakness, albeit from a position of extreme strength," Simons wrote in a research note on Thursday. "It is still too early to tell if this is another step in the process of the labor market coming into better balance, or if it is the early stages of building momentum to the downside."

The signs of weakness Simons called out has backed the case for the Federal Reserve to begin cutting interest rates soon, per multiple economists. On Monday, Goldman Sachs chief economist Jan Hatzius wrote in a research note that with inflation slowing, the Fed should consider interest rates as early as July, given the recent loosening in the labor market.

In June, the unemployment rate rose for the third-consecutive month to 4.1%, up from 4% in May.

"The bottom line is clear," Hatzius wrote. "While layoffs remain subdued, the unemployment rate is gradually trending higher because hiring is not strong enough to absorb all new native- and foreign-born labor force entrants. The updrift in the unemployment rate has been welcomed by Fed officials so far, but we agree with Chair Powell’s assessment that the labor market is now fully back in balance.

"We may be approaching an inflection point at which further softening in labor demand results in a bigger and much less welcome increase in unemployment."

As of Thursday morning markets were pricing in a roughly 98% chance the Fed will cut interest rates by the end of its September meeting. Meanwhile, investors were putting the chances it cuts during its next meeting on July 30-31 at just shy of 5%, per the CME FedWatch Tool."

MY COMMENT

Bring on the rate cuts in September. It is much better to make a single cut a bit early.....than make it too late. This data is another brick in the rate cut wall.

 

As to my comment above.....

Goolsbee Says Fed Risks ‘Golden Path’ If It Doesn’t Cut Soon

https://finance.yahoo.com/news/goolsbee-says-fed-risks-golden-142920304.html

 

I think I will stick with what I own.....even if we are seeing rotation.

Why small caps are showing up the tech titans

https://finance.yahoo.com/news/why-...-the-tech-titans-morning-brief-100034487.html

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

"Small caps are solving Wall Street's concentration problem.

Though small caps stumbled Wednesday, in the five prior trading days, the Russell 2000 (^RUT) rocketed an eyewatering 12% as the Nasdaq Composite (^IXIC) barely remained green. It was a surge that had never been surpassed by any of the major US stock indexes, according to Bespoke.

The catalyzing event was last week's dovish Consumer Price Index, which reported an actual decline in prices of 0.1%. The sign change in inflation was enough to convince holdouts on Wall Street that there's more to stocks in 2024 than the well-known cadre of tech titans riding the artificial intelligence wave.

But laggards are once again turning to leaders, bringing to mind the "everything rally" that dominated the fourth quarter last year.

As the Magnificent titans wilt, smaller pockets of strength fill the leadership void. Sector rotation is the lifeblood of bull markets, they say.

Since last Tuesday's close, Real Estate has led the large-cap sectors, up 7%. On its heels, cyclicals and values are well represented — as Materials, Industrials, Energy, and Financials are all up about 5%.

The only two losers are also the highest-returning sectors for the year — Tech (XLK) and Communication Services (XLC) — down 4% and 2%, respectively.

Delving into the financial sector, we see the SPDR S&P Regional Banking ETF (KRE) has now clawed its way back to the drop-off point from last year's internet bank crisis. The 16% surge is a notable move for regionals, which have had a rough two years since their 2022 highs.

The SPDR S&P Homebuilders ETF (XHB) also jumped more than 14% on Monday, and notched its first record high since March.

While the prospect of tamer inflation is behind much of the move, Trump's surge in popularity after the weekend assassination attempt is also a factor. Investors believe banks will benefit from a lighter regulatory touch, and the steepening yield curve over the last week also helps.

Then there's crypto. For all the talk about spot ether ETFs, the bitcoin halving, and Gary Gensler, Trump's crypto support has helped bring bitcoin (BTC-USD) back from a nasty sell-off that might have had bearish legs.

After all the gyrations over the last week, the two leading sectors in 2024 remain Tech and Communication Services — each holding on to gains of about 17%. But the handwringing over concentration can finally take a breather — at least, for now."

MY COMMENT

As an investor I never worry about rotations or sectors. In fact I dont ever even think about this stuff. What I focus on is the specific companies that I own. I want to own the best of the best for the long term....proven winners that are still young enough to have a long runway ahead of them.

AND.....I welcome others making money in what they own. Success for others does not take success away from me.

I am certainly NOT going to chase a hot stock or a hot sector.......but.......anything that prolongs the current bull market is just fine for me.

 

WELL....we started out today with a good green general market. ALL the big averages reflected buying at the open and were UP nicely. NOW......about 1.5 hours in......all are red.

The drama and burden of the short term. IGNORE IT ALL......IT IS NOT RELEVANT. That is my mantra.

You know I have a lot of years investing. I was just thinking about all the new and young investors. What do they think about all this CRAZY day to day stuff? How in the world do they have any idea what to do or how to invest with what they are bombarded with every single day? It is a very difficult environment for new and young investors.......... trying to figure out.......... how to be an investor.

 

As an AMZN shareholder I like this little story.

Amazon Prime Day drives U.S. online sales to record $14.2 billion

https://www.cnbc.com/2024/07/18/ama...e-sales-climb-to-record-14point2-billion.html

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

"Key Points

• U.S. shoppers spent a record $14.2 billion online during Amazon’s two-day Prime event, up 11% year over year, according to Adobe Analytics data.
• Consumer electronics and back-to-school products were among the top categories.
• Amazon also touted “record-breaking” Prime Day sales, though it didn’t disclose specific figures.

Online spending in the U.S. surged 11% year over year to $14.2 billion during Amazon’s 48-hour Prime Day event, topping estimates and setting a new record, according to Adobe Analytics.

Adobe said the strong showing was driven by back-to-school shopping and an “apparent product refresh cycle,” as consumers looked to snap up new tablets, TVs and Bluetooth speakers in droves. That’s a shift from last year, when inflation-weary shoppers used the discount event to stock up on household essentials like pantry staples and office supplies.

The company had predicted U.S. shoppers would spend $14 billion online during the two-day event. Adobe tracks transactions not just on Amazon but also across a wide swath of U.S. retail sites. Amazon’s Prime Day event, which ran Tuesday and Wednesday, has become a big revenue driver for other retailers, which often hold competing sales timed around Prime Day.

Amazon said Thursday it also saw “record-breaking” Prime Day revenue, though it didn’t disclose total sales from the event. The company touted its Rufus shopping assistant, which uses generative artificial intelligence to suggest products and give order updates, saying the tool “helped millions” of shoppers browse the site. Amazon last week made Rufus available to all U.S. users after testing it with a subset of shoppers.

Numerator, which tracked purchases across more than 35,500 households, said shoppers spent more per order this year, with an average order size of $57.97, up from $54.05 during last year’s event. Shoppers snapped up Amazon-branded Fire TV sticks, Premier protein shakes and Liquid IV packets, while home goods and household essentials, as well as apparel and shoes, were among the top categories, the firm found.

“Shoppers purchased fewer big-ticket items than we’ve seen in past years, and fewer participants placed multiple orders throughout the sale, indicating a shift to more conscious shopping and a preference for saving over splurging,” Numerator analyst Amanda Schoenbauer said in a statement."

MY COMMENT

WOW.....$14.2BILLION in only two days. AND.....up by 11% year over year. Those are amazing numbers.

I have been more encouraged lately by how AMZN is operating and the current management. I had significant doubts about the new management for a long time. Now they appear to be operating the company well and are learning how to pull all the levers.

 

I love media coverage and content like below. Basically free advertising for COSTCO. Similar to the stories a while back about people buying gold at COSTCO.

Doomsday dinners: Costco sells ‘apocalypse bucket’ with food that lasts 25 years

https://www.cnbc.com/2024/07/18/doo...pse-bucket-with-food-that-lasts-25-years.html

 

Everything is looking very good today and lately for the markets........except for the averages. The economic data is coming in nicely for rate cuts. The FED is simply done and irrelevant. We are at the start of a MASSIVE turn over in business and the world with AI tech. The bull market might be broadening. At the same time we are about as far from over-exuberance as we can get.

AND.....today the yield on the Ten Year Treasury is.....4.16%.

LOOKING GOOD IN THE NEIGHBORHOOD.

BUT....remember.......the old BLACK SWAN potential never goes away. The attempted assassination of Trump is a perfect example. The......?pending?.......removal of Biden is another swan in the making. The election outcome in a few months....another potential swan. World events.

You can never anticipate the unknown and unexpected. All you can do is accept the fact that "stuff happens" once in a while and there is nothing you can do about it.

 

At this point in the day today....I am doing 100% better than yesterday. I now have.....TWO.....stocks in the green.....HD and PLTR. At this time yesterday I had only one......HD.

I will take it.....not that I have any choice.

 

People should be careful what they wish for. NOW...ALL the averages are in the RED including the small cap RUSSELL 2000. AND...of all the big averages the RUSSELL is down the most right now.....nearly 2%.

 

At least I have made progress. I still have only two stocks UP today. But now....one of them is NVDA. The other is PLTR.

If anything is going to be up....NVDA is the best possible holding for me since it is the largest percentage of my portfolio.

 

This is a ROTATION all right.......a ROTATING sell off. LOL.

Small caps today led all stocks selling off.....even worse than the DOW which was off by over 500 points. Actually the NASDAQ was off the least of all the averages......(-0.70%). The RUSSELL 2000......(-1.58%)

Dow tumbles 500 points, S&P 500 slides as broad sell-off intensifies

https://www.cnbc.com/2024/07/17/stock-market-today-live-updates.html